AGREEMENT AND PLAN OF MERGER
by and among
KAR HOLDINGSII,LLC
("Buyer")
KAR HOLDINGS, INC.,
a wholly owned subsidiary of Buyer
("Holdings")
KAR ACQUISITION, INC.,
a wholly owned subsidiary of Holdings
("Merger Sub")
and
ADESA, INC.
Dated as of
December22, 2006
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December22, 2006, (this "Agreement"),
by and among ADESA, Inc., a Delaware corporation (the "Company"), KAR HoldingsII,LLC,
a Delaware limited liability company ("Buyer"), KAR Holdings, Inc., a Delaware corporation
and wholly owned subsidiary of Buyer ("Holdings"), and KAR Acquisition, Inc., a
Delaware corporation and wholly owned subsidiary of Holdings ("Merger Sub").
W I T N E S S E T H :
WHEREAS, the parties wish to effect a business combination through a merger of
the Merger Sub with and into the Company upon the terms and subject to the conditions
set forth herein;
WHEREAS, the Boards of Directors of the Company, Holdings and Merger Sub, and
the Board of Managers of Buyer, have each approved this Agreement, the Merger and
the other transactions contemplated by this Agreement and declared that the Merger
and the other transactions contemplated by this Agreement are advisable and in the
best interests of their stockholders on the terms and subject to the conditions
set forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement and as
a condition to the Companys willingness to enter into this Agreement, the Company
is entering into a limited guarantee with the parties named in the exhibits attached
hereto collectively as ExhibitA (collectively, the "Limited Guarantee"), with respect
to certain matters on the terms specified therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, Buyer, Holdings,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Definitions.
(a) The following terms, as used herein, have the following meanings:
"2004 Equity Plan" means the ADESA, Inc. 2004 Equity and Incentive Plan.
"AFC Business Unit" has the meaning set forth in Section 3.13(c).
"Affiliate" shall have the meaning set forth in Rule12b-2 of the regulations
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the Preamble.
"Allete" has the meaning set forth in Section 3.23.
"Alternative Transaction" means any of the following: (i)a transaction or series
of transactions pursuant to which any Third Party (or group of Third Parties) acquires
or seeks to acquire, directly or indirectly, beneficial ownership of more than twenty-five
percent (25%) of the outstanding shares of Company Common Stock or any other class
or series of securities of the Company or any Material Subsidiary, whether from
the Company (or such Material Subsidiary) or pursuant to a tender offer or exchange
offer or otherwise; (ii)a merger or other business combination (x)in which any Third
Party acquires more than twenty-five percent (25%) of the outstanding equity securities
or voting power of the Company or any Material Subsidiary, or (y)immediately after
which the Persons who were the stockholders of the Company prior to such merger
or business combination cease to own, directly or indirectly, more than seventy-five
percent (75%) of the outstanding equity securities or voting power of the Person
surviving such merger or other business combination (or if such Person is a wholly-owned
Subsidiary of another Person, of such other Person); (iii)a consolidation, recapitalization,
share exchange, or similar extraordinary transaction involving the Company or any
of its Material Subsidiaries (other than the recapitalization of any Material Subsidiary
by the Company, or a merger, consolidation, share exchange or amalgamation involving
any Material Subsidiary with the Company or any other Subsidiary); (iv)any other
transaction or series of transactions pursuant to which any Third Party acquires
or would acquire, directly or indirectly, assets of the Company and its Subsidiaries
representing, in the aggregate, more than twenty-five percent (25%) of the assets
of the Company and its Subsidiaries on a consolidated basis; or (v)a transaction
or series of transactions which is similar in form, substance or purpose to any
of the foregoing transactions, or any combination of the foregoing; provided, however,
that the term Alternative Transaction shall not include any acquisition of securities by a broker dealer in connection with a bona fide public
offering of such securities.
"Anticipated Prepayment Date" has the meaning set forth in Section 6.19.
"Applicable Law" means, with respect to any Person, any domestic, foreign, federal,
state, provincial, municipal, or local statute, law, by-law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority applicable to such Person or
any of its Affiliates or any of their respective properties, assets, officers, directors,
employees, consultants or agents (in connection with such officers, directors,
employees, consultants or agents activities on behalf of such Person or any of
its Affiliates).
"Balance Sheet Date" has the meaning set forth in Section 3.8(b)(i).
"Bank of America Hedge Agreement" means the ISDA Master Agreement, dated as of
June 21, 2004, between the Company and Bank of America, National Association, and
all agreements and documents executed in favor of Bank of America, National Association
in connection therewith.
"Business Day" means any day on which the principal offices of the SEC in Washington,
D.C. are open to accept filings, or, in the case of determining a date when any
payment is due, a day other than a Saturday, Sunday or any other day on which commercial
banks in NewYork City, NewYork are authorized or required by law to close.
"Buyer" has the meaning set forth in the Preamble.
"Buyer Material Adverse Effect" means any effect, change, condition, occurrence,
development, event, or series of events or circumstances that, individually or in
the aggregate with other effects, changes, conditions, occurrences, developments,
events or circumstances, would prevent or materially impede, interfere, hinder or
delay Buyer, Holdings or Merger Sub from consummating the Merger or any of the other
transactions contemplated by this Agreement, including, without limitation, materially
adversely delay the Financing or materially amend or expand the conditions to the
drawdown of the Financing in any respect that would make such conditions less likely
to be satisfied.
"Buyer Parties" means, collectively, Buyer, Holdings and Merger Sub.
"Buyer Termination Fee" has the meaning set forth in Section 8.3(d)(i).
"Buyer Transaction Expenses" means the reasonable and reasonably documented out-of-pocket
expenses incurred by Buyer, Holdings, Merger Sub, Equity Sponsors and their respective
Affiliates (which shall include, without limitation, fees and expenses of financial
advisors, financial sources, outside legal counsel and accountants and other Representatives)
in connection with this Agreement and the transactions contemplated hereby, including
fees and expenses incurred by IAAI, the Equity Sponsors and their respective Representatives
in preparing for and conducting, as applicable, a due diligence investigation relating
to the Company and its Subsidiaries in connection with the transactions contemplated
hereby (and a due diligence investigation relating to IAAI and its subsidiaries
by any Equity Sponsor and its Representatives other than Kelso and its Representatives),
but specifically excluding any fees and expenses to the extent attributable to the
refinancing of IAAI prior to the Closing or otherwise exclusively related to matters
related to the financial statements of IAAI or other fees and expenses related to
IAAI that would be incurred even in the absence of this Agreement or the transactions
contemplated hereby.
"Buyer Units" has the meaning set forth in Section 4.8.
"Buyers Disclosure Letter" means the written disclosure schedule delivered by
Buyer to the Company concurrently with the execution and delivery of this Agreement
and, subject to the qualifications set forth in Section 6.5, as the same may be
amended or supplemented from time to time after the date hereof as permitted herein.
"Canadian Employee Plans" means all bonus, stock option, stock purchase, incentive,
deferred compensation, post-employment or retirement, supplemental retirement, unemployment,
severance, vacation, insurance or hospitalization program and any other fringe or
employee benefit plans, programs or arrangements maintained, administered or contributed
to by the Company or its Canadian Subsidiaries for any current or former employee,
director, and any current or former employment or executive compensation or severance
agreements, for the benefit of, or relating to, any employee of the Company and
its Canadian Subsidiaries employed or previously employed in locations in Canada,
but excluding (i)any agreements with former employees under which neither the Company
nor any of its Canadian Subsidiaries has any remaining monetary obligations; (ii)
any Company Employee Plans; and (iii) any statutory or governmental plan, program
or arrangement to which the Company or a Canadian Subsidiary is required by Canadian
Law to contribute.
"Canadian Subsidiary" means a Subsidiary of the Company incorporated under the
laws of Canada or a province thereof.
"Capitalization Date" has the meaning set forth in Section 3.2(b).
"Cashed-Out ESPP Purchase Right" has the meaning set forth in Section 2.4(f)(iii).
"Cashed-Out Restricted Stock Unit Award" has the meaning set forth in Section
2.4(f)(ii).
"Cashed-Out Stock Option" has the meaning set forth in Section 2.4(f)(i).
"Certificate of Merger" has the meaning set forth in Section 2.3.
"Change in Recommendation" has the meaning set forth in Section 5.3(f).
"Claim" has the meaning set forth in Section 6.9(a)(ii)(x).
"Cleanup" means all actions required to cleanup, remove, treat, remediate, monitor,
mitigate or prevent the further migration of Hazardous Substances in the indoor
or outdoor environment, including, without limitation, performance of environmental
studies and investigations in preparation for any remediation activities required
by any Person pursuant to Environmental Law.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letters" has the meaning set forth in Section 4.7.
"Company" has the meaning set forth in the Preamble.
"Company Board Recommendation" has the meaning set forth in Section 6.1.
"Company Common Stock" means the Common Stock, $0.01 par value, of the Company.
"Company Employee Plans" means all "employee benefit plans" as defined in Section3(3)
of ERISA, bonus, stock option, stock purchase, incentive, deferred compensation,
post-employment or retirement, supplemental retirement, unemployment, severance,
vacation, insurance or hospitalization program and any other fringe or employee
benefit plans, programs or arrangements maintained, administered or contributed
to by the Company or its U.S. Subsidiaries for any current or former employee, director, consultant or agent, and any current
or former employment or executive compensation or severance agreements, written
or otherwise, for the benefit of, or relating to, any employee of the Company and
its U.S. Subsidiaries, but excluding (i)any agreements with former employees under
which neither the Company nor any of its Subsidiaries has any remaining monetary
obligations; and (ii)any statutory or governmental plan, program or arrangement
to which the Company or a Subsidiary is required by Law to contribute.
"Company ESPP" means the ADESA, Inc. Employee Stock Purchase Plan.
"Company Financing Fees and Expenses" means (A) the reasonable and reasonably
documented out of-pocket expenses incurred by the Company and its Subsidiaries and
their respective Affiliates in connection with (i)the voiding, termination and/or
destruction of all documents executed by the Company or any of its Subsidiaries
in connection with their cooperation in the Financing as contemplated by Section
6.13(b) hereof and (ii)providing to Buyer the cooperation in connection with the
arrangement of the Financing as contemplated by Section 6.13(b) hereof; and (B)
the losses, damages, costs, expenses and penalties incurred by the Company or any
of its Subsidiaries in connection with the arrangement of the Financing and any
information utilized in connection therewith (other than information provided by
the Company or its Subsidiaries), except to the extent that such losses, damages,
costs, expenses and penalties, directly or indirectly, resulted solely from or arose
solely out of the willful misconduct of the Company or any of its Subsidiaries and
their respective Representatives.
"Company Material Adverse Effect" means any effect, change, condition, occurrence,
development, event, or series of events or circumstances that, individually or in
the aggregate with other effects, changes, conditions, occurrences, developments,
events or circumstances, has or have a material adverse effect on, or a material
adverse change in, (A)the condition (financial or otherwise), properties, business
or results of operations of the Company and the Subsidiaries of the Company as presently
conducted, taken as a whole; other than any effect, change, condition, occurrence,
development, event or series of events or circumstances arising out of or resulting
from: (i)any decrease in the market price or trading volume of the Companys securities
or any effect resulting from any such change (provided that the underlying causes
of such decrease shall be considered in determining whether there is a Company Material
Adverse Effect); (ii)any change in Law, GAAP or interpretation or enforcement thereof
that applies to the Company and the Subsidiaries of the Company, including the proposal
or adoption of any new Law or GAAP; (iii)any change, occurrence, development, event,
or series of events or circumstances affecting the general economic or business
conditions in the United States or any other country in which the Company and the
Subsidiaries of the Company operate, provide or sell their products and services
or otherwise do business; (iv)any change, occurrence, development, event, or series
of events or circumstances affecting companies operating in the industries or markets
in which the Company and the Subsidiaries of the Company operate, provide or sell
their products or services or otherwise do business; (v)any change, occurrence,
development, event, or series of events or circumstances affecting national or international
political conditions, including engagement by the United States in hostilities,
whether or not pursuant to the declaration of a national emergency or war, or the occurrence
of any military or terrorist attack upon the United States; (vi) any action taken
by the Company at the written request of Buyer, Holdings, Merger Sub, the Lenders
or the Equity Sponsors; or (vii)any change, occurrence, development, event, or series
of events or circumstances principally resulting from the execution of this Agreement
or the consummation of any of the transactions contemplated by this Agreement or
principally due to the public announcement of the execution of this Agreement or
the transactions contemplated by this Agreement, including, without limitation,
the loss of existing customers or employees, a reduction in business by, or revenue
from, existing customers, disruption in suppliers, distributors, partners or similar
relationships, and any litigation brought by stockholders of the Company in connection
with the Merger; provided, that clause (vii) shall not apply with respect to the
matters described in Section 3.4 and Section 3.5 hereof (including for purposes
of Section 7.2(a) hereof insofar as Section 3.4 and Section 3.5 are concerned);
provided, further, that, in the case of the foregoing clauses(ii), (iii), (iv)and
(v) above, such changes, conditions, occurrences, developments, events or circumstances
do not disproportionately affect the Company and its Subsidiaries taken as a whole
relative to the other participants in the industry or geographic market in which
the Company and its Subsidiaries conduct their respective businesses), or (B)the
ability of the Company to perform its obligations under this Agreement or to consummate
the Merger or the other transactions contemplated hereby. For purposes of determining
whether changes, conditions, occurrences, developments, events or circumstances
relating to earthquakes, hurricanes or other natural disasters constitute a Company
Material Adverse Effect, insurance proceeds received in respect of such earthquakes,
hurricanes or other natural disasters and repairs made to the damages caused by
such earthquakes, hurricanes or other natural disasters, in each case, on or prior
to the applicable date of determination, shall be taken in to account in determining
whether a Company Material Adverse Effect has occurred. References in this Agreement
to dollar amount thresholds shall not be deemed to be evidence of materiality or
of a Company Material Adverse Effect.
"Company Notes" means the Companys outstanding 7 5/8% Senior Subordinated Notes
due 2012 issued under the Company Notes Indenture.
"Company Notes Indenture" means the Indenture, dated June21, 2004, between the
Company and LaSalle Bank National Association, as trustee.
"Company Permits" has the meaning set forth in Section 3.14(b).
"Company Preferred Stock" means the Preferred Stock, $0.01 par value, of the
Company.
"Company Property" has the meaning set forth in Section 3.15(a).
"Company SEC Reports" has the meaning set forth in Section 3.8(a).
"Company Stock Certificate" has the meaning set forth in Section 2.4(e)(i).
"Company Stock Options" means all options to purchase shares of Company Common
Stock under the 2004 Equity Plan.
"Company Stock Plans" mean the 2004 Equity Plan and the Director Compensation
Plan.
"Company Termination Fee" has the meaning set forth in Section 8.3(b).
"Company Transaction Expenses" means collectively, without duplication, (i)the
Company Financing Fees and Expenses; (ii)the Credit Facility Fees and Expenses;
and (iii)the reasonable and reasonably documented out-of-pocket expenses incurred
by the Company, any Subsidiary of the Company, and their respective Affiliates (which
shall include, without limitation, fees and expenses of financial advisors, financial
sources, outside legal counsel and accountants and other Representatives) in connection
with this Agreement and the transactions contemplated hereby.
"Companys Disclosure Letter" means the written disclosure schedule delivered
by the Company to Buyer concurrently with the execution and delivery of this Agreement
and, subject to the qualifications set forth in Section 6.5, as the same may be
amended or supplemented from time to time after the date hereof as permitted herein.
"Competition Act" means the Competition Act (Canada), as amended.
"Confidentiality Agreement" has the meaning set forth in Section 6.3.
"Continuing Employees" has the meaning set forth in Section 6.11(b).
"Contract" means any contract, agreement, undertaking, indenture, note, bond,
guarantee, loan, instrument, lease, license, mortgage, commitment or other binding
agreement, in each case whether written or oral.
"Convertible Securities" has the meaning set forth in Section 3.2(d).
"Credit Facility" means the Indebtedness and credit commitments of the Credit
Facility Agent, the Credit Facility Lenders and any letter of credit issuer under
the Credit Agreement and the other Loan Documents (as defined in the Credit Facility
Agreement).
"Credit Facility Agent" means Bank of America, N.A., as Administrative Agent
under the Credit Facility Agreement.
"Credit Facility Agreement" means that certain $500,000,000 Amended and Restated
Credit Agreement, dated as of July 25, 2005, among the Company, Bank of America,
N.A., as Credit Facility Agent, Swing Line Lender, L/C Issuer, and Collateral Agent,
the Credit Facility Lenders, and certain other parties identified as Subsidiary
Guarantors, Documentation Agent, Syndication Agent and Managing Agents thereunder.
"Credit Facility Fees and Expenses" has the meaning set forth in Section 6.19.
"Credit Facility Lenders" means the parties identified as Lenders from time to
time under the Credit Facility Agreement.
"Credit Suisse" has the meaning set forth in Section 3.7.
"Debt Commitment Letters" has the meaning set forth in Section 4.7.
"Debt Financing" has the meaning set forth in Section 4.7.
"DGCL" means the Delaware General Corporation Law and all amendments and additions
thereto.
"Director Compensation Plan" means the ADESA, Inc. Director Compensation Plan.
"Dissenting Shares" has the meaning set forth in Section 2.4(g)(i).
"Effective Time" has the meaning set forth in Section 2.3.
"Environmental Claim" means any claim, action, cause of action, investigation,
notice, writs, injunctions, orders and decrees by any Person alleging potential
liability (including potential liability for investigatory costs, Cleanup costs,
governmental response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (i)the presence,
or Release of any Hazardous Substances at any location, whether or not owned or
operated by the Company or any of its Subsidiaries; or (ii)circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means any Law in existence on the date hereof pertaining
to (i) treatment, storage, disposal, generation and transportation of Hazardous
Substances; (ii) air, water and noise pollution; (iii) groundwater and soil contamination;
(iv) the Release or threatened Release of Hazardous Substances, or solid or hazardous
waste, including, without limitation, emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants, or chemicals; (v) the protection
of wildlife, marine life and wetlands, including, without limitation, all endangered
and threatened species; (vi) health and safety of employees and other persons to
the extent that such health and safety matters pertain to the handling of, or exposure
to Hazardous Substances; and (v) manufacturing, processing, using, distributing,
treating, storing, disposing, transporting or handling of materials regulated under
any Environmental Law as a Hazardous Substance.
"Equity Commitment Letters" has the meaning set forth in Section 4.7.
"Equity Financing" has the meaning set forth in Section 4.7.
"Equity Sponsors" means, collectively, Kelso, Goldman, ValueAct and Parthenon
(and together with other equity sponsors in substitution therefor or addition thereto
in accordance with Section 6.13).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" means any business or entity which is a member of the same
"controlled group of corporations," under "common control" or an "affiliated service
group" with an entity within the meanings of Sections414(b), (c)or (m)of the Code,
or required to be aggregated with the entity under Section414(o) of the Code, or
is under "common control" with the entity, within the meaning of Section400l(a)(14)
of ERISA, or any regulations promulgated or proposed under any of the foregoing
Sections of ERISA and the Code.
"ESPP Cash-Out Payment" has the meaning set forth in Section 2.4(f)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Expenses" has the meaning set forth in Section 6.9(a)(ii)(y).
"Final Date" has the meaning set forth in Section 8.1(b).
"Financing" has the meaning set forth in Section 4.7.
"First Quarter 2007 Financials" means the consolidated financial statements of
the Company and its consolidated Subsidiaries that would be included in the Companys
Quarterly Report on Form 10-Q for the period ending March 31, 2007.
"Fiscal 2006 Financials" means the consolidated financial statements of the Company
and its consolidated Subsidiaries that would be included in the Companys Annual
Report on Form 10-K for the year ending December 31, 2006.
"GAAP" means United States generally accepted accounting principles.
"Goldman" means GS Capital Partners VI, L.P. and its related GSCP VI co-investment
funds.
"Governmental Authority" means any territorial, federal, state, provincial, municipal
or local, whether domestic, foreign or supranational governmental or quasi-governmental
authority, instrumentality, court, commission, tribunal or organization; any regulatory,
administrative or other agency; any self-regulatory organization; any national stock
exchange; or any political or other subdivision, department or branch of any of
the foregoing.
"Hazardous Substance" means any substance, material, or waste listed, defined,
designated or classified as hazardous, dangerous, toxic or radioactive, or as a
pollutant or contaminant under any applicable Environmental Law, including petroleum
and any derivative or by-products thereof, and friable asbestos.
"Hedge Agreement Counterparties" means each of LaSalle Bank National Association,
as counterparty under the LaSalle Hedge Agreement, and Bank of America, National
Association, as counterparty under the Bank of America Hedge Agreement.
"Hedge Agreements" means each of the Bank of America Hedge Agreement and the
LaSalle Hedge Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"IAAI" means Insurance Auto Auctions, Inc.
"Indebtedness" means, with respect to any Person, (i)indebtedness, notes payable,
bonds, debentures, accrued interest payable or other obligations of such Person
for borrowed money, whether current, short-term or long-term, secured or unsecured;
(ii)lease obligations under leases which are classified as capital leases of such
Person under GAAP (excluding any operating leases of such Person under GAAP); (iii)indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person; (iv)obligations of such Person
for the deferred purchase price of property or services (other than trade payables
and obligations of such Person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of business consistent with past practices);
(v)obligations of such Person pursuant to or evidenced by hedging, swap, factoring,
interest rate, currency or commodity derivatives arrangements, Contracts or other
similar instruments; (vi)off-balance sheet financing of such Person including synthetic
leases and project financing; (vii)Indebtedness of another Person referred to in
clauses(i) through (vi) above guaranteed, directly or indirectly, jointly or severally,
in any manner by such Person; (viii)Indebtedness referred to in clauses(i) through
(vii) above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property or assets
owned by such Person; and (ix)reimbursement obligations of such Person with respect
to letters of credit (other than (A)letters of credit issued for the benefit of
suppliers to support accounts payable to suppliers incurred in the ordinary course
of business consistent with past practices, (B)standby letters of credit relating
to workers compensation insurance and surety bonds, and (C)surety bonds and customs
bonds), bankers acceptance or similar facilities issued for the account of such
Person.
"Indemnified Parties" has the meaning set forth in Section 6.9(a).
"Insurance Policies" has the meaning set forth in Section 3.21.
"Intellectual Property Rights" means all U.S. and foreign (i)patents and patent
applications ("Patents"); (ii)trademarks, service marks, and trade names and registrations
and applications for registration thereof ("Trademarks"); (iii)copyrights and registrations
and applications for registration thereof ("Copyrights"); (iv)Internet domain name
registrations; and (v)trade secret rights and other proprietary rights in confidential
information, or know-how ("Trade Secrets").
"International Continuing Employees" has the meaning set forth in Section 6.11(b).
"Investment Canada Act" means the Investment Canada Act (Canada), as amended.
"IRS" means the United States Internal Revenue Service.
"Kelso" means Kelso Investment Associates VII, L.P.
"Knowledge of the Buyer Parties" means the actual knowledge of the individuals
set forth in Section 1.1(a) of the Buyers Disclosure Letter.
"Knowledge of the Company" means the actual knowledge of the executive officers
of the Company set forth in Section 1.1(a) of the Companys Disclosure Letter.
"LaSalle Hedge Agreement" means the ISDA Master Agreement, dated as of October
31, 2005, between the Company and LaSalle Bank National Association, and all agreements
and documents executed in favor of LaSalle Bank National Association in connection
therewith.
"Law" means any federal, state, provincial, municipal, foreign or local law (including
common law), by-law, statute, ordinance, rule, regulation, order, injunction (preliminary
or permanent), judgment or decree.
"Lease Agreements" has the meaning set forth in Section 3.15(c).
"Lenders" means, collectively, Bear Stearns Corporate Lending Inc., UBS Loan
FinanceLLC, UBS SecuritiesLLC, Goldman Sachs Credit PartnersL.P., Deutsche BankAG
NewYork Branch, Deutsche BankAG Cayman Islands Branch and Deutsche Bank Securities
Inc.
"Liens" means with respect to any asset (including any security) or property,
any mortgage, claim, license, lien, pledge, charge, easement, covenant, reservation,
option, right of first offer or refusal, rights-of-way, transfer restriction, security
interest or other encumbrance or title imperfection or defect of any kind or nature
in respect to such asset, security or property.
"Limited Guarantee" has the meaning set forth in the Preamble.
"Major AFC Customers" has the meaning set forth in Section 3.13(c).
"Major Auction Customers" has the meaning set forth in Section 3.13(a).
"Major Customers" has the meaning set forth in Section 3.13(c).
"Major Salvage Customers" has the meaning set forth in Section 3.13(b).
"Marketing Period" means the first period of thirty (30) consecutive days after
the date hereof throughout which, and at the end of which, (A) Buyer shall have
the Required Financial Information, (B) the conditions set forth in Section 7.1
shall be satisfied and nothing has occurred and no condition exists that would cause
any of the conditions set forth in Section 7.2 (other than the actual delivery of
the certificates described in Section 7.2 and the obligations of the Company described
in Section 6.18 and Section 6.19 that are only required to be satisfied at the Effective
Time) to fail to be satisfied assuming the Closing were to be scheduled for any
time during such thirty (30) consecutive day period, and (C) the financial statements
contained in the Required Financial Information and the Company SEC Reports shall
have included an unqualified audit opinion of the applicable auditor for such financial
statements (and such opinion shall not have been withdrawn); provided, however,
that the Marketing Period shall in no event commence on or prior to March30, 2007;
and provided, further, that if, prior to the completion of any such thirty (30)
consecutive days, the financial statements included in the Required Financial Information
that is available to Buyer on the first day of such thirty (30) consecutive days
would be "stale," within the meaning of Rule 3-12 of Regulation S-X on any day during
such thirty (30) consecutive day period if a registration statement using such financial
statements were to be filed with the SEC on any such date (it being understood that
such financial statements shall not be deemed "stale" for these purposes if the
underwriter(s) of the high yield financing indicate that marketing the high yield
financing with such financial statements included in such Required Financial Information
would not have a material adverse impact on the price or marketability of such high
yield financing), then the Marketing Period shall be extended for an additional
period of time (not to exceed thirty (30) consecutive days) as reasonably requested
by the underwriter(s) of the high yield financing (it being understood that the
intent of the foregoing extension is to provide Buyer with updated financial information
of the Company and its consolidated Subsidiaries such that Buyer would have financial
statements and data (of the type contemplated by the Required Financial Information,
but updated with respect thereto) of the Company necessary, in the reasonable and
customary judgment of the underwriter(s), to effectively market the high-yield financing.
Notwithstanding the foregoing, the Marketing Period shall not be deemed to have
ended for any purposes of this Agreement if the conditions set forth in Section
7.1 do not continue to be satisfied during any thirty (30) consecutive day period,
or any condition exists that causes any of the conditions set forth in Section 7.2
(other than the actual delivery of the certificates described in Section 7.2 and
the obligations of the Company described in Section 6.18 and Section 6.19 that are
only required to be satisfied at the Effective Time) to fail to continue to be satisfied
(assuming the Closing were to be scheduled on the last day of such thirty (30) consecutive
day period), at the conclusion of such thirty (30) consecutive day period. For the
avoidance of doubt, in no event shall the start of any Marketing Period be delayed
by, or any Marketing Period be extended as a result of, any matter associated with
IAAI, including, without limitation, matters associated with the financial statements
of IAAI.
"Material Contracts" has the meaning set forth in Section 3.12(a)(xii).
"Material Subsidiaries" means the Subsidiaries of the Company set forth on Section
1.1(b) of the Companys Disclosure Letter.
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" has the meaning set forth in Section 2.4(e)(i).
"Merger Sub" has the meaning set forth in the Preamble.
"New Commitment Letters" has the meaning set forth in Section 6.13(d).
"NYSE" means the NewYork Stock Exchange.
"Other Securities" has the meaning set forth in Section 3.2(d).
"Parthenon" means Parthenon Investors II, L.P.
"Paying Agent" has the meaning set forth in Section 2.5(a).
"Payment Fund" has the meaning set forth in Section 2.5(a).
"Permitted Liens" means (i)Liens securing Indebtedness and liabilities disclosed
on the Companys consolidated balance sheets as of the Balance Sheet Date; (ii)Liens
for Taxes and utilities not yet due or delinquent and Liens for Taxes being
contested in good faith by appropriate proceedings and for which there are adequate
reserves on the financial statements of the Company (if such reserves are required
pursuant to GAAP); (iii)construction, mechanics, materialmens or other similar
Liens for construction in progress; (iv)workmens, repairmens, warehousemens,
carriers, storers or other similar Liens arising or incurred in the ordinary
course of business of the Company or any Subsidiary of the Company; (v)with
respect to Company Properties, any zoning and other land use restrictions, survey
exceptions, utility easements, rights of way and similar agreements, easements,
covenants, reservations, restrictions and Liens that are imposed by any Governmental
Authority having jurisdiction thereon or by Applicable Law or otherwise disclosed
on any title insurance policy, title report, or survey made available to Buyer
prior to the date hereof; (vi)with respect to any real property, including,
without limitation, Company Property, any and all title exceptions (whether
material or immaterial) disclosed on a survey made available to Buyer prior
to the date hereof, Liens and obligations arising under the Material Contracts
or the Lease Agreements, and any other Lien that does not materially adversely
affect the current use, value or marketability of such property; (vii)easement
agreements and all other matters disclosed on any title report or survey made
available to Buyer prior to the date hereof or, in the case of real property
located in Canada, otherwise disclosed by registered title to such property
as of the date hereof; (viii)matters that are disclosed on current title reports
or surveys made available to Buyer prior to the date hereof; (ix)other Liens
being contested in good faith in the ordinary course of business and which would not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect; and/or (x)as to any leased real property, any Lien
affecting the interest of the landlord thereof.
"Person" means an individual, a corporation, a partnership, a limited liability
company, an association, a trust, a joint venture or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Property Restrictions" has the meaning set forth in Section 3.15(a).
"Proxy Statement" means the proxy statement to be used by the Company to
obtain the approval and adoption of this Agreement and the Merger by the stockholders
of the Company.
"Registered Intellectual Property Rights" shall mean all U.S. and foreign
registrations and applications for Patents, Copyrights, Trademarks and Internet
domain names.
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, dispersal, leaching or migration into the indoor
or outdoor environment (including ambient air, surface water, groundwater and
surface or subsurface strata) or into or out of any property, including the
movement of Hazardous Substances through or in the air, soil, surface water,
groundwater or property.
"Representative" means with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, legal counsel, accountant, bank,
Affiliate or other representative of that Person.
"Required Financial Information" means (i)the Fiscal 2006 Financials; and
(ii)(A)any "pro forma" financial statements of the Company and its consolidated
Subsidiaries with respect to the Fiscal 2006 Financials and (B)such other financial
data and other information, including such information that would be necessary
in order to receive customary "comfort" (including "negative assurance" comfort)
from independent accountants, regarding the Company and its consolidated Subsidiaries
as are of the type and form customarily included in the offering(s) of debt
securities contemplated by the Debt Commitment Letters that the underwriter(s)
of the high yield financing may reasonably request prior to the commencement
of the Marketing Period, and that in the case of (A) and (B) is of the type
required by RegulationS-X and RegulationS-K under the Securities Act and of
the type and form customarily included in a registration statement on FormS-1
(or any applicable successor form) under the Securities Act for a public offering
to consummate the offering(s) of debt securities contemplated by the Debt Commitment
Letters; provided, however, the underwriter(s) of the high yield financing must
make such request with respect to financial information set forth in subsection (ii) above within ten (10) Business Days after delivery of the
Fiscal 2006 Financials by the Company to Buyer and/or such underwriter(s) and
the commencement of the Marketing Period shall not be delayed due to the failure
of the Company to provide the Required Financial Information if the failure
of such underwriters to make the request within the ten (10) Business Day period
was the principal cause of or reasonably resulted in the delay of the Company
in providing the Required Financial Information to Buyer and/or such underwriter(s);
provided, further, if the Fiscal 2006 Financials would be "stale," within the
meaning of Rule 3-12 of Regulation S-X on any day during the Marketing Period
if a registration statement using the Fiscal 2006 Financials were to be filed
with the SEC on any such day during such Marketing Period (it being understood
that such Fiscal 2006 Financials shall not be deemed "stale" for these purposes
if the underwriter(s) of the high yield financing indicate that marketing the
high yield financing with such Fiscal 2006 Financials included in such Required
Financial Information would not have a material adverse impact on the price
or marketability of such high yield financing), then the term "Fiscal 2006 Financials"
in clause (i) and (ii) above shall be replaced, in each case, with the term
"First Quarter 2007 Financials". For the avoidance of doubt, Required Financial
Information shall in no event include information related to IAAI, the Equity
Sponsors, Buyer, Holdings or Merger Sub and the audit opinion (and any qualification
or withdrawal thereof) of IAAIs independent auditor shall have no impact on
the Marketing Period or the Required Financial Information.
"Requisite Stockholder Vote" has the meaning set forth in Section 3.3.
"Restricted Stock Unit" has the meaning set forth in Section 2.4(f)(ii).
"Restricted Stock Unit Award" has the meaning set forth in Section 2.4(f)(ii).
"Restricted Stock Unit Cash-Out Payment" has the meaning set forth in Section
2.4(f)(ii).
"Sarbanes-Oxley Act" has the meaning set forth in Section 3.8(c).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Separation Tax Treatment" has the meaning set forth in Section 3.23.
"Spin-Off Date" has the meaning set forth in Section 3.23.
"Stock Option Cash-Out Payment" has the meaning set forth in Section 2.4(f)(i).
"Stockholder Meeting" has the meaning set forth in Section 6.1.
"Subsidiary" means, with respect to any Person, any other Person of which
more than fifty percent (50%) of the securities or other ownership interests
having by their terms ordinary voting power to elect a majority of the board
of directors, or of other Persons performing similar functions, of such other
Person is directly or indirectly owned or controlled by such Person or by one
or more of such Persons Subsidiaries (as defined in the preceding clause).
"Superior Offer" means a bona fide written offer, which if accepted would
constitute a legally binding agreement, made by Buyer relating to amending or
otherwise modifying this Agreement on terms that the Board of Directors of the
Company determines in good faith and after consultation with its outside legal
counsel and financial advisor would be at least as favorable to the Companys
stockholders, from a financial point of view, as the transactions contemplated
by the Superior Proposal identified to Buyer in the notice described in Section
5.3(g) hereof.
"Superior Proposal" means a bona fide written proposal made by a Third Party
relating to an Alternative Transaction (provided that, for purposes of the definition
of "Superior Proposal," the term "Alternative Transaction" shall have the meaning
assigned above, except that (a)references to "more than twenty-five percent
(25%)" shall be deemed to be references to "more than fifty percent (50%),"
(b)references to "more than seventy-five percent (75%)" shall be deemed to be
references to "more than fifty percent (50%)" and (c)clause(iii) of the definition
of "Alternative Transaction" shall not be given effect except to the extent
of "a merger or other business combination" described therein) on terms that
the Board of Directors of the Company determines in good faith and after consultation
with its outside legal counsel and financial adviser would be, or is reasonably
likely to be, more favorable to the Companys stockholders, from a financial
point of view, than the transactions contemplated by this Agreement (taking
into account any proposals by Buyer to amend the terms of this Agreement in
response thereto pursuant to Section 5.3(g) hereof).
"Superior Proposal Agreement" has the meaning set forth in Section 5.3(g).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" or "Taxes" means taxes, assessments, fees, levies, duties, tariffs,
imposts and governmental impositions or charges of any kind in the nature of
(or similar to) taxes, payable to any federal, state, provincial, municipal,
local or foreign taxing authority, including (without limitation) (i)income,
franchise, profits, gross receipts, ad valorem, net worth, goods and services, fringe benefits, sales, use, service, real or personal property,
special assessments, license, payroll, withholding, employer health, employment,
social security, Canada Pension Plan, accident compensation, workers compensation,
unemployment compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii)interest, penalties,
additional taxes and additions to tax imposed with respect thereto.
"Tax Returns" means returns, reports and information statements with respect
to Taxes required to be filed with the IRS, the Canada Revenue Agency or any
other taxing authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
"Third Party" means any Person (or group of Persons) other than a party to
this Agreement or an Affiliate of such a party.
"U.S. Continuing Employees" has the meaning set forth in Section 6.11(a).
"UBS" has the meaning set forth in Section 3.7.
"ValueAct" means ValueAct Capital Master Fund, L.P.
"Voting Debt" has the meaning set forth in Section 3.2(d).
Section 1.2 Other Terms. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meanings
throughout this Agreement.
Section 1.3 Other Definitional Provisions. In this Agreement, except to the
extent otherwise provided or that the context otherwise requires:
(a) when a reference is made in this Agreement to an Article, Section, Exhibit
or Schedule, such reference is to an Article or Sectionof, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated;
(b) whenever the words "include," "includes" or "including" are used in this
Agreement, they are deemed to be followed by the words "without limitation";
(c) the words "hereof," "herein" and "hereunder" and words of similar import,
when used in this Agreement, refer to this Agreement as a whole and not to any
particular provision of this Agreement;
(d) unless there is a specific reference to "Business Day" or "Business Days,"
which is defined herein, the words "day" and "days" when used in this Agreement
refer to a calendar day or calendar days.
(e) references to any statute, rule or regulation are to the statute, rule
or regulation as amended, modified, supplemented or replaced from time to time
(and, in the case of statutes, include any rules and regulations promulgated
under the statute) and to any section of any statute, rule or regulation include
any successor to the section;
(f) all terms defined in this Agreement have the defined meanings when used
in any certificate or other document made or delivered pursuant hereto, unless
otherwise defined therein;
(g) the definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms;
(h) references to a Person are also to its successors and permitted assigns;
and
(i) the use of "or" is not intended to be exclusive unless expressly indicated
otherwise.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Subject to and in accordance with the terms and conditions
of this Agreement, Merger Sub will merge with and into the Company (the "Merger")
at the Effective Time. The Company shall be the corporation surviving the Merger
(the "Surviving Corporation") and, at the Effective Time, the separate corporate
existence of Merger Sub shall cease.
Section 2.2 The Closing. Unless this Agreement shall have been terminated
in accordance with Section 8.1, and subject to the provisions of ARTICLE VII,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Morrison & Foerster LLP, at 425Market Street,
San Francisco, California 94105, commencing at 10:00a.m. local time as soon as
practicable but in no event later than two(2) Business Days following the satisfaction
or waiver of all conditions to the obligations of the parties to consummate
the transactions contemplated hereby (other than conditions with respect to
actions the respective parties will take at the Closing itself, including the
receipt of the Financing, but subject to the satisfaction or waiver of such
conditions), or such other place or date as the parties may mutually determine;
provided, however, that notwithstanding the satisfaction or waiver of the conditions set forth in ARTICLE VII hereof, the Buyer Parties shall not
be required to effect the Closing until the earlier of (a)a date during the
Marketing Period specified by Buyer on no less than two (2) Business Days written
notice to the Company and (b)the final day of the Marketing Period (the date
and time of the Closing is referred to herein as, the "Closing Date").
Section 2.3 Effective Time. On the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing all necessary documentation, including
a Certificate of Merger in the form attached hereto as Exhibit B (the "Certificate
of Merger"), with the Secretary of State of the State of Delaware, and Buyer
will deliver, or cause to be delivered, the Payment Fund to the Paying Agent
in the manner provided in Section 2.5. The Merger shall be effective upon filing
of the Certificate of Merger with the Secretary of State of the State of Delaware,
or on such later date as may be specified therein (the time of such effectiveness
being the "Effective Time").
Section 2.4 Effect of Merger.
(a) General. The Merger will have the effects set forth in the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all of the property, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation. The Surviving Corporation
may, at any time after the Effective Time, take any action (including executing
and delivering any document) in the name and on behalf of either the Company
or Merger Sub in order to carry out and effectuate the transactions contemplated
by this Agreement. The Surviving Corporation shall thereafter be responsible
and liable for all the liabilities and obligations of the Company and Merger
Sub.
(b) Certificate of Incorporation. The Certificate of Incorporation of Merger
Sub in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation, except that the name of the Surviving
Corporation shall be changed to "ADESA, Inc."
(c) Bylaws. The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter
amended as provided by Law and such Bylaws and the Certificate of Incorporation
of the Surviving Corporation.
(d) Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws
of the Surviving Corporation. The officers of Merger Sub at and after the Effective
Time shall be the officers of the Surviving Corporation, each to hold office
in accordance with the Bylaws of the Surviving Corporation.
(e) Conversion of Company Shares.
(i) At and as of the Effective Time, each outstanding share of Company Common
Stock (other than Dissenting Shares and shares of Company Common Stock held
by Buyer, Holdings, the Company or Merger Sub, or any direct or indirect wholly
owned Subsidiary of Buyer, Holdings, the Company or Merger Sub) shall be converted
into the right to receive an amount (the "Merger Consideration") equal to $27.85
in cash (without interest), upon surrender of the certificate representing such
outstanding share of Company Common Stock (the "Company Stock Certificate")
in the manner set forth in Section 2.5, and as of the Effective Time, each outstanding
share of Company Common Stock shall no longer be issued and outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a Company Stock Certificate shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration (or, if applicable,
to be treated as a Dissenting Share as described in Section 2.4(g)); provided,
however, that the Merger Consideration shall be subject to equitable adjustment
in the event of any stock split, stock dividend, reverse stock split or other
change in the number of Company Common Stock prior to the Effective Time, it
being understood that (i)the intent of such equitable adjustment is to provide
the holders of Company Common Stock, Company Stock Options and Restricted Stock
Units the same economic effect as contemplated by this Agreement prior to any
such change and (ii)nothing herein shall be construed to permit the Company
to take any action with respect to its securities that is prohibited by the
terms of this Agreement.
(ii) At and as of the Effective Time, each Dissenting Share shall be treated
as described in Section 2.4(g).
(iii) At and as of the Effective Time, each share of Company Common Stock
held by Buyer, Holdings, the Company or Merger Sub, or any direct or indirect
wholly owned Subsidiary of Buyer, Holdings, the Company or Merger Sub shall
be cancelled and extinguished without the payment of any consideration therefor.
(f) Company Stock Options; Restricted Stock Unit Awards; Stock Purchase Plan;
Deferred Compensation Plans.
(i) By virtue of the Merger and without any action on the part of the Company,
Buyer, Holdings, Merger Sub or the holders of Company Stock Options, each Company
Stock Option outstanding immediately prior to the Effective Time shall accelerate
and fully vest as of the Effective Time (each, a "Cashed-Out Stock Option").
Each holder of a Cashed-Out Stock Option shall be eligible to receive an amount
in cash (without interest) equal to (A) the excess, if any, of the Merger Consideration over the exercise price pursuant to such
Cashed-Out Stock Option multiplied by (B) the number of shares of Company Common
Stock subject to such Cashed-Out Stock Option, less all applicable deductions
and withholdings required by Law to be withheld in respect of such payment.
Buyer shall transfer, or cause to be transferred, the necessary funds (the "Stock
Option Cash-Out Payment") to the Surviving Corporation and Buyer shall cause
the Surviving Corporation to pay to each holder of a Cashed-Out Stock Option
the amounts contemplated by this Section 2.4(f)(i), as soon as practicable after
the Effective Time and in any case within two(2) Business Days thereafter. Buyer
shall cause the Surviving Corporation to pay any amounts withheld for withholding
Taxes promptly to the appropriate Governmental Authority on behalf of such holder
of a Cashed-Out Stock Option.
(ii) By virtue of the Merger and without any action on the part of the Company,
Buyer, Holdings, Merger Sub or the holders of awards (a "Restricted Stock Unit
Award") of restricted stock units (each, a "Restricted Stock Unit") issued pursuant
to the 2004 Equity Plan, each Restricted Stock Unit Award outstanding immediately
prior to the Effective Time shall accelerate and shall be cancelled at the Effective
Time (each, a "Cashed-Out Restricted Stock Unit Award"). Each holder of a Cashed-Out
Restricted Stock Unit Award shall be eligible to receive at the Effective Time
an amount in cash (without interest) equal to (A) the Merger Consideration multiplied
by (B) the number of shares of Company Common Stock subject to each Cashed-Out
Restricted Stock Unit, less all applicable deductions and withholdings required
by Law to be withheld in respect of such payment. Buyer shall transfer, or cause
to be transferred, the necessary funds (the "Restricted Stock Unit Cash-Out
Payment") to the Surviving Corporation and Buyer shall cause the Surviving Corporation
to pay to each holder of a Cashed-Out Restricted Stock Unit Award the amounts
contemplated by this Section 2.4(f)(ii), as soon as practicable after the Effective
Time and in any case within two(2) Business Days thereafter. Buyer shall cause
the Surviving Corporation to pay any amounts withheld for withholding Taxes
promptly to the appropriate Governmental Authority on behalf of such holder
of a Cashed-Out Restricted Stock Unit Award.
(iii) Promptly after the date hereof, the Company shall suspend the Company
ESPP so that no new purchase periods (as defined in the Company ESPP) shall
commence and no new participants shall enroll in the Company ESPP after the
date hereof. The current purchase period in progress under the Company ESPP
shall terminate pursuant to its terms and any purchase rights existing immediately
prior to the Effective Time under the Company ESPP to acquire a share of Company
Common Stock shall be cancelled at the Effective Time (each, a "Cashed-Out ESPP
Purchase Right"). Each holder of a Cashed-Out ESPP Purchase Right shall be eligible
to receive at the Effective Time an amount in cash (without interest) equal
to (A)the excess, if any, of the Merger Consideration over the purchase price
payable by the holder to acquire such share of Company Common Stock pursuant to the terms of the Company ESPP, multiplied
by (B)the number of shares of Company Common Stock issuable upon exercise of
the purchase rights, less all applicable deductions and withholdings required
by Law to be withheld in respect of such payment. Buyer shall transfer the necessary
funds (the "ESPP Cash-Out Payment") to the Surviving Corporation and Buyer shall
cause the Surviving Corporation to pay to each holder of a Cashed-Out ESPP Purchase
Right the amounts contemplated by this Section 2.4(f)(iii), as soon as practicable
after the Effective Time and in any case within two(2) Business Days thereafter.
Buyer shall cause the Surviving Corporation to pay any amounts withheld for
withholding Taxes promptly to the appropriate Governmental Authority on behalf
of such holder of a Cashed-Out ESPP Purchase Right. In addition, as soon as
practicable after the Effective Time and in any case within two(2) Business
Days thereafter, Buyer shall cause the Surviving Corporation to return to participants
their respective accumulated payroll contributions and optional cash payments
not applied to the purchase of Company Common Stock under the Company ESPP,
if any.
(iv) Prior to the Effective Time, the Company shall provide notice to each
holder of Company Stock Options and Restricted Stock Units and to participants
in the Company ESPP describing the treatment of such Company Stock Options,
Restricted Stock Units and the purchase periods then in effect under the Company
ESPP under this Section 2.4(f). At the Effective Time the Company shall terminate
the Company Stock Plans and the Company ESPP.
(v) Following and subject to the payment of all accrued account balances
under each of the ADESA, Inc. Director Compensation Deferral Plan and ADESA,
Inc. 2005 Supplemental Executive Retirement Plan in accordance with their terms,
the Company shall take all actions necessary so that each such plan shall terminate
at the Effective Time.
(vi) Prior to the Effective Time, the Company, in consultation with Buyer,
shall use its reasonable best efforts to take such action as Buyer shall reasonably
request in connection with obtaining any necessary consents to give effect to
the treatment of Company Stock Options, Restricted Stock Units and participants
in the Company ESPP as contemplated by this Section 2.4(f), to the extent that
such treatment is not expressly provided for by the terms of the applicable
Company Stock Option Plans, Company ESPP or related award agreements; provided,
that the failure to obtain any such consents shall not be considered a breach
for purposes of Section 7.2(a) solely with respect to Section 3.3 and Section
3.4, Section 7.2(b) or Section 8.1(g) hereof.
(g) Dissenting Shares.
(i) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Common Stock held by a holder who has demanded and validly
perfected appraisal rights for such shares in accordance with Section262 of
the DGCL and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal rights (the "Dissenting Shares") shall not be converted
into or represent a right to receive the Merger Consideration pursuant to this
Section 2.4, but the holder thereof shall only be entitled to such rights as
are granted by Section262 of the DGCL.
(ii) Notwithstanding the provisions of subsection (i) above, if any holder
of shares of Company Common Stock who demands purchase of such shares under
Section262 of the DGCL shall effectively withdraw or lose (through failure to
perfect or otherwise) such holders appraisal rights, then, as of the later
of (A) the Effective Time or (B) the occurrence of such event, such holders shares
of Company Common Stock shall automatically be converted into and represent
only the right to receive the Merger Consideration as provided in this Section
2.4, without interest thereon, upon surrender to the Surviving Corporation or
the Paying Agent, as applicable, of the Company Stock Certificate.
(iii) The Company shall give Buyer (A) prompt notice of its receipt of any
written demands for appraisal rights and any withdrawals of such demands, and
(B) the opportunity to participate in all negotiations and proceedings with respect
to demands for appraisal rights under Section262 of the DGCL. The Company shall
not, except with the prior written consent of Buyer, make any payment with respect
to any demands for purchase of Company Common Stock pursuant to appraisal rights
or offer to settle or settle or approve any withdrawal or other treatment of
any such demands.
(h) Conversion of Capital Stock of Merger Sub. At and as of the Effective
Time, each share of common stock, $.01 par value per share, of Merger Sub shall
be converted into one share of common stock, $.01 par value per share, of the
Surviving Corporation.
Section 2.5 Procedure for Payment.
(a) Deposit of Funds. Immediately following the Effective Time, Buyer shall
or shall cause the Surviving Corporation to deposit with Bank of New York or
a bank or trust company mutually acceptable to Buyer and the Company (the "Paying
Agent") cash (the "Payment Fund") sufficient in the aggregate for the Paying
Agent to make full payment of the Merger Consideration to the holders of all
of the outstanding Company Common Stock (other than any Dissenting Shares and shares of Company Common Stock held by Buyer,
Holdings, the Company or Merger Sub, or any Subsidiary of Buyer, Holdings, the
Company or Merger Sub) which such holders are entitled to receive pursuant to
this ARTICLE II. The Payment Fund shall not be used for any other purpose. On
or simultaneously with the Closing Date, the Company (solely in its capacity
as the Surviving Corporation), Buyer, Holdings, Merger Sub and the Paying Agent
shall enter into a paying agent agreement, on terms and conditions that are
reasonably satisfactory to the parties hereto.
(b) Procedures. Promptly (and in any event within two(2) Business Days) after
the Effective Time, the Surviving Corporation shall cause the Paying Agent to
mail a letter of transmittal in customary form and containing such customary
provisions as Buyer and the Company may reasonably specify (including a provision
confirming that delivery of Company Stock Certificates shall be effected, and
risk of loss and title to Company Stock Certificates shall pass, only upon delivery
of such Company Stock Certificates to the Paying Agent and provisions regarding
those Company Stock Certificates held in book-entry form) to each record holder
of Company Common Stock outstanding at the Effective Time for the holder to
use in surrendering the Company Stock Certificate against payment of the Merger
Consideration. No interest will accrue or be paid to the holder of any outstanding
shares of Company Common Stock. Upon surrender of a Company Stock Certificate
for cancellation to the Paying Agent, together with a letter of transmittal
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be reasonably required pursuant to such instructions,
the Paying Agent shall make full payment of the Merger Consideration (less applicable
withholding Taxes) to each holder of Company Common Stock (other than any Dissenting
Shares and shares of Company Common Stock held by Buyer, Holdings, the Company
or Merger Sub or any Subsidiary of Buyer, Holdings, the Company or Merger Sub)
within three(3) Business Days after such stockholder surrenders such stockholders
Company Stock Certificates to the Paying Agent (or an affidavit to the effect
that their Company Stock Certificates shall have been lost, stolen or destroyed
in accordance with Section 2.7 to the Paying Agent) and the Company Stock Certificate
so surrendered shall forthwith be cancelled. In the event of a transfer of ownership
of the Company Common Stock that is not registered in the transfer records of
the Company, the Merger Consideration may be paid to a Person other than the
Person in whose name the Company Stock Certificate surrendered is registered,
if such certificate shall be properly endorsed or otherwise be in proper form
for transfer and the Person requesting such issuance establishes to the satisfaction
of the Paying Agent that the prior transfer was valid; provided that it shall
be a condition of payment that the Person who surrenders such Company Stock
Certificate must provide funds for payment of any transfer or other Taxes required
by reason of the payment to a Person other than the registered holder of the
surrendered Company Stock Certificate or establish to the satisfaction of the
Surviving Corporation that the Tax has been paid or is not applicable.
(c) Investment of Payment Fund. Buyer may cause the Paying Agent to invest
the cash included in the Payment Fund as directed by Buyer; provided, however,
that no such investment or loss thereon shall affect the amounts payable or
the timing of payments of the aggregate Merger Consideration, and that the terms
and conditions of the investments shall be such as to permit the Paying Agent
to make prompt payment of the aggregate Merger Consideration, as necessary. Buyer may cause the Paying Agent to pay over
to the Surviving Corporation any net earnings with respect to the investments,
and Buyer shall cause the Surviving Corporation to replace promptly any portion
of the Payment Fund which the Paying Agent loses through investments.
(d) Termination of Payment Fund. Buyer may cause the Paying Agent to pay
over to the Surviving Corporation any portion of the Payment Fund (including
any earnings thereon) remaining twelve(12) months after the Effective Time,
and thereafter all former stockholders of the Company shall be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat and other
similar Laws) as general creditors thereof with respect to the cash payable
upon surrender of their Company Stock Certificates. Any portion of the Payment
Fund remaining unclaimed by former stockholders of the Company as of a date
which is immediately prior to such time as such amounts would otherwise escheat
to or become property of any Governmental Authority shall, to the extent permitted
by Applicable Law, become the property of the Surviving Corporation free and
clear of any claims or interest of any person previously entitled thereto.
(e) Paying Agent Expenses. Buyer shall cause the Surviving Corporation to
pay all charges and expenses of the Paying Agent.
(f) Withholding Taxes. Buyer, the Paying Agent and the Surviving Corporation
shall be entitled to deduct and withhold from payments otherwise payable pursuant
to this Agreement to any holder of Company Common Stock, Company Stock Options
and Restricted Stock Units, as applicable, such amounts as they are respectively
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local or foreign Tax Law. To the extent
that amounts are so withheld, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of Company Common
Stock, Company Stock Options and Restricted Stock Units, as applicable, in respect
of which such deduction and withholding was made.
Section 2.6 No Further Transfers of Company Common Stock. Following the Effective
Time, there shall be no further registration of transfers on the records of
the Company of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Company Stock Certificates
are presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this ARTICLE II.
Section 2.7 Lost, Stolen or Destroyed Certificates. In the event any Company
Stock Certificates shall have been lost, stolen or destroyed, the Paying Agent
shall pay the Merger Consideration in exchange for such lost, stolen or destroyed
Company Stock Certificates, upon the making of an affidavit of that fact by
the holder thereof; provided that the Surviving Corporation may, in its discretion
and as a condition precedent to the payment thereof, require the owner of such
lost, stolen or destroyed Company Stock Certificates to provide an indemnity
or deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against the Surviving Corporation with respect to the Company
Stock Certificates alleged to have been lost, stolen or destroyed.
Section 2.8 Further Action. If, at any time after the Effective Time, any
further action is reasonably necessary or desirable to carry out the purposes
of this Agreement or to vest the Surviving Corporation with full right, title
and possession to all assets, property, rights, privileges, powers and franchises
of either the Company or Merger Sub, the officers and directors of the Surviving
Corporation are fully authorized to take, and will take, all such lawful and
reasonably necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and Merger Sub, except
as set forth in (A)the Companys Disclosure Letter (after giving effect to the
principles set forth in Section 9.1(b)) or (B)the Company SEC Reports filed
prior to the date hereof, including the notes to the financial statements accompanying
the financial statements set forth in the Company SEC Reports filed prior to
the date hereof, but excluding the risk factors, forward-looking statements
and financial statements set forth in such Company SEC Reports filed prior to
the date hereof (provided that (i)clause(B) above shall not apply to Sections3.2
through 3.5, 3.7, 3.8(a), the first sentence of 3.9, 3.12, 3.13, 3.19, 3.20
and 3.22 (other than as provided therein) through 3.25 of this Agreement and
(ii) clause (B) above shall only apply to Sections3.1, 3.6, 3.8(b), 3.8(c), the
second sentence of 3.9, 3.10, 3.11, 3.14 through 3.18 and 3.21 if, and only
if, the nature and content of the applicable disclosure in any Company SEC Reports
filed prior to the date hereof to Sections identified in this clause (ii), as
applicable, is reasonably specific as to matters and items such that the subject
matter of such disclosure is reasonably apparent on the face of the text of
such disclosure to be applicable to the representation set forth in the applicable
Section identified in this clause (ii)), as follows:
Section 3.01 Due Organization of Company.
(a) The Company and each of the Material Subsidiaries are duly organized,
validly existing and in good standing under the Laws of the jurisdiction of
their organization. The Company and each of the Material Subsidiaries have the
corporate power and authority to carry on their business as they are now being
conducted and to own all of their properties and assets, except where the failure
to have such corporate power has not had, and would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
True and complete copies of the Certificate of Incorporation and Bylaws of the
Company and the charter, bylaws, partnership agreement, limited liability company
agreement and other organizational documents of the Material Subsidiaries in
effect on the date hereof have been made available to Buyer prior to the date
hereof. The Company and each of the Material Subsidiaries are duly qualified
as foreign corporations to do business, and are in good standing (to the extent
the concept of good standing exists), in each jurisdiction where the character
of their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified has
not had, and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company and each of the Material
Subsidiaries have all business licenses, permits and approvals necessary to
conduct their business as presently conducted, except where the failure to have
such permit or approval has not had, and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. Neither
the Company nor any of the Material Subsidiaries is in material violation of
any of the provisions of its organizational documents.
(b) Section 3.1(b) of the Companys Disclosure Letter sets forth a true and
complete list of all of the Subsidiaries of the Company, including the jurisdiction
of organization of each Subsidiary. Except for its interests in its Subsidiaries,
the Company does not own, directly or indirectly, any capital stock of, or other
equity interests in, any other Person. Other than the Material Subsidiaries,
each of the other Subsidiaries of the Company is not a "significant subsidiary"
as defined by Regulation S-X of the Securities Act.
Section 3.02 Capitalization.
(a) The authorized capital stock of the Company consists of five hundred
million (500,000,000) shares of Company Common Stock and fifty million (50,000,000)
shares of Company Preferred Stock. As of December20, 2006, (i) eight million
five hundred thousand (8,500,000) shares of Company Common Stock are reserved
for issuance under the 2004 Equity Plan; (ii) two hundred thousand (200,000)
shares of Company Common Stock are reserved for issuance under the Director
Compensation Plan; and (iii) five hundred thousand (500,000) shares of Company
Common Stock are reserved for issuance under the Company ESPP.
(b) As of the close of business on December20, 2006 (the "Capitalization
Date"), (i) Eighty Nine Million Nine Hundred Ninety Six Thousand Three Hundred
Forty Nine and Two Hundred Forty Nine Thousandths (89,996,349.249) shares of
Company Common Stock were issued and outstanding; (ii) no shares of Company Preferred
Stock were issued or outstanding; (iii) Company Stock Options to acquire Four
Million Two Hundred Thousand One Hundred Twenty One (4,200,121) shares of Company
Common Stock were outstanding; and (iv)Two Hundred Eighty Six Thousand Ninety
Seven and Three Hundred Sixty Two Thousandths (286,097.362) Restricted Stock
Units were outstanding.
(c) Since the Capitalization Date to the date of this Agreement, except in
connection with the issuance of Company Common Stock pursuant to the exercise
of Company Stock Options outstanding as of the Capitalization Date, no shares
of Company Common Stock, Company Preferred Stock, Restricted Stock Units or
other equity securities of the Company have been issued and no Company Stock
Options have been granted. All outstanding shares of Company Common Stock are,
and all shares of Company Common Stock subject to issuance, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable will be, duly authorized, validly issued, fully paid and nonassessable and free of any preemptive or similar rights and issued in
compliance with all applicable securities Laws. Section 3.2(c) of the Companys
Disclosure Letter sets forth a true, correct and complete list, as of the Capitalization
Date, of each Company Stock Option, Restricted Stock Unit or other equity-based
award outstanding, the number of shares of Company Common Stock issuable thereunder,
expiration date and exercise price related thereto and the Company Stock Option
Plan pursuant to which each such Company Stock Option, Restricted Stock Unit
or other equity-based award was granted.
(d) Except for the Company Stock Options and the Restricted Stock Units,
there are no (i) existing options, warrants, calls, subscription rights, Contracts,
convertible securities or other rights, agreements or commitments (contingent
or otherwise) that obligate the Company or any of its Subsidiaries to issue,
transfer or sell any Company Common Stock or any other equity interest in, or
debt security of, the Company or any of its Subsidiaries, or any investment
or security that is convertible into or exercisable or exchangeable for any
such shares or interests (collectively, "Convertible Securities"), (ii) equity
equivalents, stock appreciation rights, phantom stock or ownership interests
in the Company or any of its Subsidiaries or similar rights (collectively, "Other
Securities"), or (iii) outstanding bonds, debentures, notes or other obligations
the holders of which have the right to vote (or which are convertible, exchangeable
or exercisable for or into securities having the right to vote) with the stockholders
of the Company on any matter (collectively, "Voting Debt", and together with
Convertible Securities, Other Securities, Company Common Stock, Company Preferred
Stock, Company Stock Options and Restricted Stock Units, the "Company Interests").
(e) There are no Contracts to which the Company or any of its Subsidiaries
is a party or bound (i)with respect to the voting or disposing of any shares
of the Company Common Stock or any capital stock of any Subsidiary of the Company,
nor to the Knowledge of the Company, as of the date of this Agreement, are there
any third party agreements or understandings with respect to the voting of any
such shares, (ii) requiring the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding securities of the Company or any
of its Subsidiaries, or (iii) requiring the Company or any of its Subsidiaries
to make any investment (in the form of a loan, capital contribution or otherwise)
in any other Person, except in the case of Subsidiaries of the Company that
comprise the AFC Business Unit, for loans made in the ordinary course of business
of the AFC Business Unit.
(f) Each outstanding share of capital stock of each Material Subsidiary is
duly authorized, validly issued, fully paid and non-assessable and was issued
in compliance in all material respects with applicable securities Laws, and
each such share is owned by the Company free and clear of all Liens.
Section 3.3 Due Authorization of Transaction; Binding Obligation. The Company
has full corporate power and authority to execute and deliver this Agreement
and, subject to obtaining the approval and adoption of this Agreement and the
Merger by the affirmative vote of the holders of a majority of the then-outstanding
shares of Company Common Stock entitled to vote thereon (the "Requisite Stockholder
Vote"), to perform its obligations hereunder and to consummate the transactions contemplated hereby,
and the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary corporate
action on the part of the Company (other than obtaining the Requisite Stockholder
Vote). Except for the adoption of this Agreement and the Merger by the Requisite
Stockholder Vote, no other corporate proceedings on the part of the Company
are required to approve this Agreement or to consummate the Merger or the other
transactions contemplated hereby. This Agreement has been duly and validly executed
and delivered by the Company and, assuming due authorization, execution and
delivery of this Agreement by Buyer, Holdings and Merger Sub, this Agreement
is the legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject to the qualification, however,
that enforcement of the rights and remedies created hereby is subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general application relating to or affecting creditors rights and to general
principles of equity affecting the availability of specific performance and
other equitable remedies. The Board of Directors of the Company, at a meeting
duly called and held, has duly (i) approved and adopted this Agreement and the
transactions contemplated hereby, including the Merger, and (ii) determined that
the terms of this Agreement are fair to and in the best interests of the Companys
stockholders.
Section 3.4 Non-Contravention. Assuming compliance with the HSR Act, the
Competition Act, any other foreign antitrust or combination Laws, the Exchange
Act, the rules and regulations of the NYSE, any applicable state securities
or "blue sky" Laws, the Requisite Stockholder Vote and the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby by the Company do not and will not (i) contravene
the Certificate of Incorporation or Bylaws of the Company, or the charter, bylaws,
partnership agreement, limited liability company agreement or other organizational
documents of any Material Subsidiary, (ii) violate any Applicable Law, or (iii) require
any consent or approval under, conflict with or result in a breach or termination
of or constitute (with or without notice or lapse of time or both) a default
(or give to others any right of termination, vesting, amendment, modification,
acceleration or cancellation) under, or result in the triggering of any payments
or result in the creation of a Lien on any property or asset of the Company
or any of its Subsidiaries, pursuant to, any Company Permit or Contract to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries or any of their respective properties or assets may
be bound, or (iv) conflict with or result in a breach of or default under any
judgment, decree, order or ruling to which the Company or any of its Subsidiaries
is a party or by which any of their assets or properties may be bound, except,
with respect to clauses (ii), (iii) and (iv) for any such contraventions, violations,
conflicts, consents, approvals, breaches or defaults which would not reasonably
be expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section 3.5 Government Approvals, Consents and Filings. Except for such filings
as required by the HSR Act, the Competition Act, any other foreign antitrust
or combination Laws, the Exchange Act, the rules and regulations of the NYSE,
any applicable state securities or "blue sky" Laws, the Requisite Stockholder
Vote and the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, no approval, authorization, consent, order, filing, registration or notification is required
to be obtained by the Company from, or made or given by the Company to, any
Governmental Authority in connection with the execution, delivery and performance
of this Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for such approvals, authorizations, consents,
orders, filings, registrations or notifications of which the failure to obtain
would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
Section 3.6 Litigation. Neither the Company nor any of its Subsidiaries (and
none of their respective officers or directors) is engaged in, or a party to,
and none of their assets or properties are subject to, or to the Knowledge of
the Company, threatened with, any legal action, formal investigation or other
proceeding before any Governmental Authority, which, individually or in the
aggregate (i) seeks to restrain, or modify or invalidate, the transactions contemplated
by this Agreement; or (ii) would reasonably be expected to have a Company Material
Adverse Effect. There is no judgment, decree, injunction, rule, writ or order
of any Governmental Authority or arbitrator outstanding against the Company
or any of its Subsidiaries or any of their respective assets or properties which,
individually or in the aggregate, would reasonably be expected to have a Company
Material Adverse Effect.
Section 3.7 Brokers Fees. Except for fees payable to UBS Securities LLC
("UBS"), Credit Suisse Securities (USA) LLC ("Credit Suisse") and the Bank of
Montreal, neither the Company nor any of its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, investment
banker, financial advisor or agent with respect to the transactions contemplated
by this Agreement for which Buyer or the Surviving Corporation could become
liable or obligated.
Section 3.8 Reports and Financial Information; No Unknown Liabilities.
(a) The Company has filed all reports, forms, statements and other documents
required to be filed with the SEC pursuant to the Exchange Act since the completion
of its initial public offering on June16, 2004 (all such reports and amendments
and supplements thereto, collectively, the "Company SEC Reports"). The Company
SEC Reports (i) complied in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, at such time of filing; and (ii) did
not, as of their respective dates (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such amendment or superseding
filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading;
provided, however, that no representation is made as to the accuracy of any
financial projections or forward-looking statements, or the completeness of
any information, furnished by the Company to the SEC solely for the purposes
of complying with Regulation FD promulgated by the SEC under the Exchange Act.
None of the Subsidiaries of the Company is, or has at any time been, subject
to the reporting requirements of Sections13(a) or 15(d) under the Exchange Act.
The financial statements of the Company included in the Companys Annual Report
on Form10-K for the fiscal year ended December31, 2005 (including the related
notes thereto) and the Companys Quarterly Reports on Form10-Q for the periods
ended March31, 2006, June30, 2006 and September30, 2006 fairly present the consolidated financial position, the
results of operations, the changes in cash flows and the changes in stockholders
equity of the Company and its consolidated Subsidiaries for the respective periods
set forth therein, in each case, in conformity with GAAP consistently applied
during the periods involved, except as otherwise noted therein and subject,
in the case of the unaudited interim financial statements, to (x) normal year-end
adjustments; and (y) the permitted exclusion of all footnotes that would otherwise
be required by GAAP.
(b) Neither the Company nor any of its Subsidiaries has any material liability
or obligation (whether accrued, absolute, known or unknown, contingent or otherwise
and whether due or to become due and whether or not required to be reflected,
reserved for or disclosed in a consolidated balance sheet of the Company and
its consolidated Subsidiaries, including the notes thereto, prepared in accordance
with GAAP) except (i) as reflected, reserved for or disclosed in the consolidated
balance sheet of the Company as at December31, 2005 (the "Balance Sheet Date"),
including the notes thereto, included in the Companys Annual Report on Form10-K
for the fiscal year ended December31, 2005; (ii) as incurred since the Balance
Sheet Date in the ordinary course of business consistent with past practice
and as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect; or (iii) as incurred or to be incurred
by the Company or any Material Subsidiary pursuant to, in connection with, or
as a result of, the Merger and the other transactions contemplated by this Agreement.
(c) Subject to any applicable grace periods, the Company has been and is
in compliance in all material respects with (A) the applicable provisions of
the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and (B) the applicable
listing and corporate governance rules and regulations of the NYSE. The Company
SEC Reports included all certificates required to be included therein pursuant
to Sections302 and 906 of the Sarbanes-Oxley Act, and the internal control report
and attestation of the Companys outside auditors required by Section404 of
the Sarbanes-Oxley Act. The Company has established and maintains disclosure
controls and procedures (as defined in Rule13a-15(e) of the Exchange Act) as
required under Rule13a15 of the Exchange Act, to ensure that material information
relating to the Company is made known to the management of the Company by others
within the Company. The Company has disclosed, based on its most recent evaluation
prior to the date hereof, to the Companys auditors and the audit committee
of the Board of Directors of the Company (i) any significant deficiencies and
material weaknesses in the design or operation of internal controls over financial
reporting (as defined in Rule13a-15(f) of the Exchange Act) which are reasonably
likely to adversely affect the Companys ability to record, process, summarize
and report financial information and (ii) any fraud or allegation of fraud, whether
or not material, known to management that involves management or other employees
who have a significant role in the Companys internal controls over financial
reporting. As of the date hereof, the Company has not identified any material
weaknesses in its internal controls over financial reporting.
Section 3.9 Absence of Certain Changes or Events. Since the Balance Sheet
Date, the Company has not suffered any change in its business, properties, condition
(financial or otherwise) or results of operation which has had, or would reasonably
be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except
as disclosed in the Companys Quarterly Reports on Form 10-Q for the periods
ended March 31, June 30 and September 30, 2006, and Current Reports on Form
8-K filed prior to the date hereof, since the Balance Sheet Date and prior to
the date hereof, neither the Company nor any of its Subsidiaries has taken any
action that would require the approval of Buyer if taken after the date hereof
pursuant to clauses (a) (other than any amendment of the Certification of Incorporation
or Bylaws or similar organizational documents or agreements of any of the Companys
wholly owned Subsidiaries), (b) (other than regular quarterly cash dividends
in Company Common Stock which have been publicly disclosed), (g), (i) and (l)
of Section 5.1.
Section 3.10 Taxes.
(a) Each of the Company and the Subsidiaries (i) has timely filed (or had
filed on their behalf) all material Tax Returns required to be filed by any
of them (after giving effect to any filing extension granted by a Governmental
Authority); and (ii) has paid (or had paid on their behalf) all material Taxes
(whether or not shown on such Tax Returns) that are required to be paid by it,
other than such payments as are being contested in good faith by appropriate
proceedings. The most recent financial statements contained in the Company SEC
Reports reflect an adequate reserve (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) for all
material Taxes payable by the Company and the Subsidiaries for all taxable periods
and portions thereof through the date of such financial statements. Copies of
all federal Tax Returns for the Company and the Subsidiaries with respect to
the taxable years commencing on or after January2003 have been made available
to representatives of Buyer. Neither the Company nor any of the Subsidiaries
has executed or filed with the IRS, the Canada Revenue Agency or any other taxing
authority any agreement, waiver or other document or arrangement extending the
period for assessment, reassessment or collection of material Taxes (including,
without limitation, any applicable statute of limitation), and no power of attorney
with respect to any material Tax matter is currently in force with respect to
the Company or any of the Subsidiaries.
(b) For taxable years beginning after December31, 2004, neither the Company
nor any of its Subsidiaries (i) has been a member of an "affiliated group" (within
the meaning of Section1504 of the Code) filing a consolidated federal income
Tax Return, or included or required to be included in any other group of entities
filing, other than a group of which the Company is the common parent, which
would cause the Company or any of its Subsidiaries to be liable for Taxes under
Treasury Regulation Section1.1502-6; or (ii) is liable for Taxes of another Person
(other than another Subsidiary of the Company) either by Contract or by reason
of being a transferee or successor of such Person.
(c) All material deficiencies asserted or assessments or reassessments made
with respect to the Company or any Subsidiary as a result of any audits or examinations
by the IRS, the Canada Revenue Agency or any other taxing authority of the Tax
Returns covering or including the Company or any Subsidiary have been paid,
and, to the Knowledge of the Company, there are no other audits, examinations
or other proceedings relating to any material Taxes of the Company or any Subsidiary by any taxing authority in progress.
Neither the Company nor any Subsidiary has received any written notice from
any taxing authority that it intends to conduct such an audit, examination or
other proceeding in respect to any material Taxes or make any material assessment
for Taxes where such matter is still pending. Neither the Company nor any Subsidiary
is a party to any material litigation or pending litigation or administrative
proceeding relating to any material Taxes.
(d) No claim has been made in writing by a taxing authority in a jurisdiction
where the Company or any Subsidiary does not file Tax Returns that the Company
or any such Subsidiary is or may be subject to taxation by that jurisdiction.
(e) Neither the Company nor any other Person on behalf of the Company or
any Subsidiary has requested any extension of time within which to file any
material Tax Return, which material Tax Return has not yet been filed.
(f) There are no material Liens for Taxes (other than Permitted Liens) upon
any of the assets of the Company or any Subsidiary.
(g) Neither the Company nor any Subsidiary has engaged in a "listed transaction"
as defined in Treasury Regulation Section1.6011-4(b)(2).
(h) The Company has not been a United States real property holding corporation
(as defined in Section897(c)(2) of the Code) during the applicable period specified
in Section897(c)(1)(A) (ii) of the Code.
Section 3.11 Employee Matters.
(a) Section 3.11(a) of the Companys Disclosure Letter lists the name of
each Company Employee Plan that is material to the Company and its U.S. Subsidiaries,
taken as a whole. The Company has made available to Buyer prior to the date
hereof copies of the following: (i) the most recent Company Employee Plan document
and all amendments thereto; (ii) the most recent annual report on Form5500 filed
with respect to each Company Employee Plan (if any such report was required
by Applicable Law); (iii) the most recent summary plan description for each Company
Employee Plan for which such a summary plan description is required by Applicable
Law and all related summaries of material modifications; (iv) the most recent
Internal Revenue Service determination, notification, or opinion letter, if
any, received with respect to each applicable Company Employee Plan; and (v) each
trust agreement, insurance contract, annuity contract, or other funding arrangement
in effect as of the date hereof and relating to any Company Employee Plan.
(b) Each of the Company Employee Plans has been administered in accordance
with their terms and all Applicable Laws and regulations except for any instances
of non-compliance that have not had, and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. No
claim, action, suit or other proceeding is pending or, to the Knowledge of the
Company, threatened with respect to any Company Employee Plan (other than claims
for benefits in the ordinary course) that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Each of the Company Employee Plans that is intended to be a "qualified
plan" within the meaning of Section401(a) of the Code is the subject of a favorable
determination or opinion letter issued by the Internal Revenue Service ("IRS")
issued after January1, 1997, and to the Knowledge of the Company no fact or
event has occurred since the date of such determination letter or letters from
the IRS to adversely affect the qualified status of any such Company Employee
Plan or the exempt status of any such trust that would reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) None of the Company Employee Plans is (i) a single employer plan or other
pension plan subject to Title IV or Section302 of ERISA or Section412 of the
Code; (ii) a "multi-employer plan" (within the meaning of Section3(37) of ERISA);
or (iii) a "multiple employer plan" (within the meaning of Section413(c) of the
Code). Since September20, 2004, neither the Company nor any ERISA Affiliate
has sponsored, maintained, contributed to or otherwise incurred any liability
with respect to any (i) single employer plan or other pension plan subject to
Title IV or Section302 of ERISA or Section412 of the Code; (ii) "multi-employer
plan" (within the meaning of Section3(37) of ERISA); or (iii) "multiple employer
plan" (within the meaning of Section413(c) of the Code).
(e) No Company Employee Plan provides benefits, including death or medical
benefits (whether or not insured), with respect to employees or former employees
of the Company beyond retirement or other termination of service benefits, except
for coverage required by Section4980B of the Code and Sections601 through 608
of ERISA (and, if applicable, comparable state law) and such promises and provisions
of benefits which have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(f) Section 3.11(f) of the Companys Disclosure Letter lists the name of
each Canadian Employee Plan that is material to the Company or its Canadian
Subsidiaries, taken as a whole. The Canadian Employee Plans have been administered
and are in material compliance with their terms and Applicable Laws. No claim,
action, suit or other proceeding is pending or, to the Knowledge of the Company,
threatened with respect to the Canadian Employee Plans (other than claims for
benefits in the ordinary course) that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. No Canadian
Employee Plan provides benefits, including death or medical benefits (whether
or not insured), but for greater certainty, excluding pension or other retirement
income benefits, with respect to employees or former employees of the Company
or a Canadian Subsidiary beyond retirement or other termination of service benefits, except for coverage
extended during any notice period applicable to any such employee or former
employee pursuant to Applicable Law and such promises and provisions of benefits
which have not had, and would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. The Company has made
available to Buyer prior to the date hereof true, correct and complete copies,
summaries or written descriptions of the Canadian Employee Plans.
(g) To the Knowledge of the Company, all contributions to, and payments from,
the Company Employee Plans and the Canadian Employee Plans that were required
to be made in accordance with their terms have been timely made.
(h) Except as expressly required or expressly permitted by this Agreement,
none of the execution of this Agreement, stockholder approval of this Agreement
or consummation of the transactions contemplated by this Agreement will (i) entitle
any employees of the Company or any of its Subsidiaries to any severance pay
or any increase in severance pay upon any termination of employment after the
date hereof; (ii) accelerate the time of payment or vesting or trigger any payment
or funding (through a grantor trust or otherwise) of any compensation or benefits
under, any Company Employee Plan or Canadian Employee Plan; (iii) result in any
material breach or violation of, or a default under, any Company Employee Plan
or Canadian Employee Plan; or (iv) result in any payment that would be a "parachute
payment" to a "disqualified individual" as those terms are defined in Section280G
of the Code, without regard to whether such payment is reasonable compensation
for personal services performed or to be performed in the future.
Section 3.12 Material Contracts.
(a) Section 3.12(a) of the Companys Disclosure Letter sets forth a list
of the following Contracts (including every amendment, modification or supplement
thereto), other than the Contracts with the Major Customers, to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets are bound or affected:
(i) any Contract which materially limits or restricts or purports to materially
limit or restrict the Company, any of its Subsidiaries or any of their respective
Affiliates from engaging in any line of business operated by the Company or
any of its Subsidiaries in any jurisdiction or materially limit the freedom
of the Company, any of its Subsidiaries or any of their respective Affiliates
to compete in any line of business operated by the Company or any of its Subsidiaries
in any geographic area or requiring the Company, any of its Subsidiaries (other
than with the Company) or any of their respective Affiliates to share any profits
derived from the business of the Company or any of its Subsidiaries;
(ii) any bonds, debentures, notes, loans, credit or loan agreements or commitments,
mortgages, indentures, credit facilities, or guarantees or other Contracts relating
to Indebtedness involving remaining principal amounts in excess of Five Million
Dollars ($5,000,000.00) in the aggregate, other than any Indebtedness in connection
with the operation of the AFC Business Unit;
(iii) any independent contractor Contracts or leased or temporary employee
Contracts involving in each case current or currently committed aggregate annual
payments of more than Two Million Dollars ($2,000,000.00);
(iv) leases of personal property involving current or currently committed
aggregate annual rent of Two Million Dollars ($2,000,000.00) or more;
(v) Contracts with a supplier or other service partner, in each case involving
current or currently committed aggregate annual payments made by the Company
or any of its Subsidiaries of more than Two Million Dollars ($2,000,000.00);
(vi) any Contract for capital expenditures or the acquisition of fixed assets
involving current or currently committed monetary obligations in excess of Two
Million Dollars ($2,000,000.00);
(vii) any Contract relating to the acquisition or disposition, directly or
indirectly, of any assets (other than those fixed assets set forth in subsection(vi)
above), real property or capital stock or other equity interests of another
Person involving continuing obligations or liabilities of the Company or any
of its Subsidiaries in excess of Two Million Dollars ($2,000,000.00);
(viii) any Contracts filed or required to be filed with the SEC pursuant
to Item 601(b)(10) of Regulation S-K under the Securities Act not otherwise
disclosed pursuant to this Section 3.12;
(ix) any acquisition Contract pursuant to which the Company or any of its
Subsidiaries has continuing indemnification, "earn out" or other contingent
payment obligations, in each case, that would reasonably be expected to result
in payments in excess of Two Million Dollars ($2,000,000.00);
(x) any Contract that (x) contains most favored customer pricing provisions
(other than Contracts entered into in the ordinary course of business consistent with past practice) or (y) grants any exclusive rights,
rights of first refusal, rights of first negotiation or similar rights to any
Third Party, in each case under this clause (y) in a manner which is material
to the businesses of the Company or any of its Material Subsidiaries;
(xi) any Contract that creates (or governs the operation of) a partnership,
joint venture, limited liability company or other similar agreement with respect
to any material business of the Company and its Subsidiaries, taken as a whole,
other than any such limited liability company, partnership or joint venture
that is a Subsidiary of the Company; and
(xii) all other Contracts (not of the type described in subsections (i) through
(xi) above) individually involving in each case payments made by or to the Company
or any of its Subsidiaries of Two Million Dollars ($2,000,000.00) or more over
the remaining term of such Contract, other than any Contracts entered into in
connection with the ope |
