Exhibit 10.7
ADESA, INC.
CHANGE IN CONTROL
AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT
(this “ Agreement ”), entered into this
21 st day of December, 2006 (the “
Effective Date ”), by and between ADESA, INC., a
Delaware corporation (the “ Company ”), and
[ ]
(the “ Executive ”).
W I T N E S S E T
H:
WHEREAS, the Company desires to (i)
enable the Executive to devote the Executive’s full attention
to management responsibilities and, when faced with a possible
Change in Control, to help the Board assess options and advise as
to the best interest of the Company and its stockholders without
being influenced by the uncertainties of the Executive’s own
situation, and (ii) demonstrate to the Executive the interest of
the Company in the Executive’s well-being and fair treatment
in the event of a Change in Control; and
WHEREAS, the Company desires to
assure the Executive that the Executive will receive certain
benefits following a Change in Control of the Company, subject to
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of
the premises and of the mutual promises and agreements contained
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the
Executive agree as follows:
1.
Definitions
. As used herein, the
following words and phrases shall have the following
meanings:
(a)
Affiliate . The term “Affiliate” shall
have the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended,
or any successor law.
(b)
Annual Bonus
. The term “Annual
Bonus” shall mean an amount equal to the Executive’s
annual cash bonus which would have been payable under the
Company’s annual incentive program in which the Executive
participates (i) immediately prior to the Change in Control had the
Executive continued in employment until the end of the fiscal year
of the Employer in which the Change in Control occurs and had cash
bonuses been payable at “target” levels for such year,
or (ii) if greater, as of the Termination Date had the Executive
continued in employment until the end of the fiscal year of the
Employer in which the Termination Date occurs and had bonuses been
payable at “target” levels for such year.
(c)
Base Salary
. The term “Base
Salary” shall mean the amount the Executive is entitled to
receive as base wages on an annualized basis as in effect
immediately prior to a Change in Control or, if greater, at any
time thereafter, in each case without reduction for any pre-tax
contributions to benefit plans. Base Salary does not include
bonuses, commissions, cost of living allowances, cash value of
perquisites or income from stock options, stock grants or
other
incentives.
(d)
Board . The term “Board” means the
board of directors of the Company; provided, that, if following a
Change in Control the Company is not the ultimate parent
corporation and is not publicly traded, the “Board”
shall be the board of directors of the ultimate parent which
directly or indirectly owns or controls all of the voting
securities of the Company.
(e)
Cause . “Cause” for termination by
the Employer of the Executive’s employment shall mean (i)
willful and continued failure by the Executive to substantially
perform the Executive’s duties on behalf of the Employer
(other than any such failure resulting from the Executive’s
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination
for Good Reason by the Executive) for a period of at least 30
consecutive days after a written demand for substantial performance
has been delivered to the Executive by the Executive’s
supervisor and/or a member of the Board, which demand specifically
identifies the manner in which the Company believes that the
Executive has not substantially performed his duties, (ii) willful
misconduct or gross negligence by the Executive which is
demonstrably and materially injurious to the Company or any of its
subsidiaries, monetarily or otherwise, (iii) material violation of
the Company’s published Standards of Business Conduct (or any
successor or similar standard thereto) that warrants termination,
or (iv) the Executive is convicted of, or has entered a plea of
nolo contendere to a felony or any crime (whether or not a
felony) involving dishonesty, fraud, embezzlement or breach of
trust. For purposes of clauses (i) and (ii) of this
definition, an act, or failure to act, on the Executive’s
part shall not be deemed “willful” if done, or omitted
to be done, by the Executive in good faith and with reasonable
belief that the Executive’s act, or failure to act, was in
the best interest of the Company.
(f)
Code . The term “Code” shall mean
the Internal Revenue Code of 1986, as amended.
(g)
Employer . The term “Employer” shall
mean, as applicable to the Executive, the Company or a subsidiary
of the Company that employs the Executive.
(h)
Good Reason
. “Good Reason”
for termination by the Executive of his employment shall mean the
occurrence (without the Executive’s express written consent)
of any one of the following acts by the Employer, or failures by
the Employer to act, following the occurrence of a Change in
Control:
(i)
A substantive adverse alteration in
the Executive’s authority, duties, responsibilities or
position from those in effect immediately prior to the Change in
Control; provided that, notwithstanding the foregoing, the
following is not “Good Reason:” (A) an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the
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Employer promptly after receipt of
notice thereof given by the Executive, or (B) a change in the
person to whom (but not the position to which) the Executive
reports;
(ii)
A reduction in the Executive’s
Base Salary or target Annual Bonus opportunity that is below the
amount of such Base Salary or target Annual Bonus opportunity in
effect immediately preceding the Change in Control;
(iii)
A reduction in the Executive’s
benefits or fringe benefits, other than pursuant to an
across-the-board reduction similarly affecting the benefits of all
of the Company’s executive officers;
(iv)
The Employer requires the Executive
to be based at any location other than within a 50-mile radius of
the location at which the Executive was based prior to the Change
in Control, except for required travel pertaining to
Employer’s business in accordance with the Employer’s
management practices in effect prior to a Change in Control or with
the prior written consent of the Executive;
(v)
The Company fails to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 10(a)
below, if required to do so; or
(vi)
The Company or an Employer purports
to terminate the Executive’s employment without supplying a
Notice of Termination which satisfies the requirements of
Section 6 below (and for purposes of this Agreement, no such
purported termination shall be effective).
Notwithstanding the foregoing, the
occurrence of an event that would otherwise constitute Good Reason
hereunder shall cease to be an event constituting Good Reason if
(x) the Executive fails to provide the Company with notice of the
occurrence of any of the foregoing within the six-month period
immediately following the date on which he first becomes aware (or
reasonably should have become aware) of the occurrence of such
event, (y) the Executive fails to provide the Company with a period
of at least 30 days from the date of such notice to cure such event
prior to terminating his employment for Good Reason or (z) the
Company does not provide the Notice of Termination to the Executive
within 90 days following the day on which the 30-day period set
forth in the preceding clause (y) expires; provided, that the
30-day notice period required by clause (y) shall end two days
prior to the end of the Term in the event that the last day of the
Term would occur during such 30-day period.
Prior to terminating employment for
Good Reason, the Executive may request in the Executive’s
sole discretion (by written notice to the General Counsel of the
Company) a determination by final and binding arbitration in
accordance with Section 10(l) below of whether Good Reason
exists. If the
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arbitrator determines that Good
Reason does not exist, the Executive may continue employment
without prejudice.
(i)
Notice of Termination
. The term “Notice of
Termination” shall mean a notice that indicates the specific
provisions in this Agreement relied upon as the basis for any
termination of employment and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so
indicated. Except under circumstances in which the Executive
elects to receive the payments and benefits set forth in Section 7
in which case his employment shall be deemed to have terminated
upon the effective date of the Change in Control, no purported
termination of employment shall be effective without a Notice of
Termination.
(j)
Plan . The term “Plan” shall mean
the ADESA, Inc. 2004 Equity and Incentive Plan.
(k)
Pro-Rata Bonus
. The term “Pro-Rata
Bonus” shall mean, with respect to the fiscal year in which
the Termination Date occurs, an amount equal to the Annual Bonus
multiplied by a fraction the numerator of which is the number of
whole and partial months that have elapsed in such fiscal year
through the Termination Date (counting any partial month as a whole
month for this purpose) and the denominator of which is 12;
provided, however, the amount of Pro-Rata Bonus as determined by
the foregoing calculation shall be reduced by the amount of any
bonus to which the Executive may become entitled to under the
Plan.
(l)
Term . The term of this Agreement shall mean
the period commencing on the Effective Date and expiring one year
from such date (the “Initial Term”); provided that a
Change in Control has not occurred. At the end of the Initial
Term and on each subsequent anniversary of such date, the term of
this Agreement shall renew automatically for a one-year period (the
“Initial Term and each such renewed term of the Agreement
shall be the “Term”) unless, at least 90 days prior to
such renewal date, the Employer shall give written notice to the
Executive that the Term shall not be extended or an event that is a
Change in Control has occurred. Upon the occurrence of a
Change in Control, the Term shall automatically be extended such
that the Term shall expire on the [third for Mr. Sales] [second
for Messrs. Lawrence and Beaver] anniversary of the Change in
Control; provided, however, if the Executive elects to receive the
payments and benefits set forth in Section 7 and upon receipt of
such payments and benefits, the Term shall be deemed to have
expired on the effective date of the Change in Control. In no
event shall this Agreement terminate prior to the Employer’s
satisfaction of all of the Employer’s obligations to the
Executive hereunder.
(m)
Termination Date
. The term “Termination
Date” shall mean the date of the termination of the
Executive’s employment with the Employer as determined in
accordance with Sections 3, 4 and 7 below.
2.
Change in Control
. For purposes of this
Agreement and subject to the last
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sentence of Section 7 below,
the term “Change in Control” shall mean the occurrence
subsequent to the effective date of this Agreement of any of the
following:
(a)
Any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 35 percent or more of either (i) the then-outstanding
shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of
the then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for
purposes of this Section 2(a) , the following acquisitions
shall not constitute a Change in Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Affiliate or (D) any
acquisition by any corporation pursuant to a transaction that
complies with Sections 2(c)(i), 2(c)(ii) and 2(c)(iii)
;
(b)
Any time at which individuals who,
as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board;
(c)
Consummation of a reorganization,
merger, statutory share exchange or consolidation or similar
transaction involving the Company or any of its subsidiaries, a
sale or other disposition of all or substantially all of the assets
of the Company, or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, a
“Business Combination”), in each case unless, following
such Business Combination, (i) all or substantially all of the
individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50 percent of
the then-outstanding shares of common stock (or, for a
non-corporate entity, equivalent securities) and the combined
voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors (or, for a
non-corporate entity, equivalent governing body), as the case may
be, of the entity resulting from such Business Combination
(including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as
their
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ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 35 percent
or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such
ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors (or, for
a non-corporate entity, equivalent governing body) of the entity
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business
Combination; or
(d)
Approval by the stockholders of the
Company of a complete liquidation or dissolution of the
Company.
Notwithstanding the foregoing, in
the event of any disposition of all or substantially all of the
assets of the Company pursuant to a spin-off, split-up or similar
transaction (a “Spin-off”), such Spin-off shall not be
deemed a Change in Control if, immediately following the Spin-off,
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, 100
percent of the outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to
vote generally in the election of directors of the entities
resulting from such transaction, in substantially the same
proportions as their ownership, immediately prior to such
transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities; provided, that if another
Business Combination involving any Resulting Entity occurs in
connection with or following a Spin-off, such Business Combination
shall be analyzed separately for purposes of determining whether a
Change in Control has occurred.
3.
Termination Following a Change in
Control . After the
occurrence of a Change in Control, the Executive shall be entitled
to receive the severance benefits described in Section 5 of
this Agreement, if after the occurrence of a Change in Control, the
Executive’s employment terminates due to (i) termination by
the Employer without Cause, or (ii) termination by the Executive
for Good Reason. No severance benefits shall be provided to
the Executive under this Agreement unless he has properly executed
and delivered to the Company an irrevocable release of
claims. A form of release of claims is attached to this
Agreement as Exhibit A . Prior to, but not following,
the occurrence of a Change in Control, but subject to Section
10(b) , the release of claims may be revised by the
Company. The Company may in any event modify the release of
claims to conform it to the laws of the local jurisdiction
applicable to the Executive so long as such modification does not
increase the obligations of the Executive thereunder. For
purposes
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of determining the Executive’s
and the Company’s rights and obligations under this
Agreement, the transfer of employment of the Executive from the
Company to one of its Affiliates, or from such an Affiliate to the
Company, in each case whether before or after the Change in
Control, shall not (by itself) constitute a termination of
employment for purposes of this Agreement.
4.
Termination Prior to Change in
Control . Provided
that a Change in Control actually occurs, if (i) the
Executive’s employment is terminated by the Employer without
Cause prior to the date of a Change in Control or (ii) the
Executive terminates employment with the Employer prior to the date
of a Change in Control due to any actions taken with respect to the
Executive prior to the date of a Change in Control that would
constitute termination by the Executive for Good Reason if such
actions were taken after the date of a Change in Control, and the
Executive reasonably demonstrates that such termination or action
(A) was at the request of a third party that has indicated an
intention or taken steps reasonably calculated to effect a Change
in Control, or (B) otherwise arose in connection with, or in
anticipation of, a Change in Control that has been threatened or
proposed, then such termination or action shall be deemed to have
occurred after such Change in Control for purposes of this
Agreement. For purposes of Section 4(i)(B), if any such
termination or action occurs while this Agreement is in effect,
then such termination or action shall conclusively be presumed to
have occurred in connection with, or in anticipation of, a Change
in Control.
5.
Severance Pay and
Benefits . If the
Executive’s employment is terminated in circumstances
entitling him to severance benefits as provided in Sections 3
and 4 , the Executive shall be entitled to each of the
following:
(a)
A lump sum cash amount paid within
the later of 30 days following (i) the Termination Date or (ii) a
Change in Control and equal to the sum of (i) the Base Salary
earned and unpaid through the Termination Date, (ii) any amounts
earned and unpaid under the Company’s accrued vacation
program, (iii) any unreimbursed expenses incurred and unpaid
through the Termination Date, and (iv) any Pro-Rata Bonus earned
and unpaid through the Termination Date;
(b)
A lump sum cash amount paid within
30 days following the Termination Date equal to [three for Mr.
Sales] [two for Messrs. Lawrence and Beaver] times the sum of
(i) the Base Salary and (ii) the Annual Bonus;
(c)
All amounts that are vested or
accrued prior to the Termination Date under all incentive
compensation, employee benefit plans or other agreements of the
Company will be paid in accordance with the provisions of such
plans;
(d)
Whether or not the Executive is
eligible for COBRA benefits and whether or not the Executive elects
COBRA coverage, if then available, the Employer shall pay the
Executive a lump sum cash payment equal to [$50,400 for Mr.
Sales] [$33,600 for Messrs. Lawrence and Beaver] , representing
an approximate cost of health insurance coverage, within 30 days
following the Termination Date;
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(e)
All life insurance benefits will
cease on the Termination Date under any applicable group life
plan. However, in order to allow the Executive to purchase
life insurance benefits, the Employer shall pay the Executive a
lump sum cash payment equal to [$15,000 for Mr. Sales] [$10,000
for Messrs. Lawrence and Beaver] within 30 days following the
Termination Date; and
(f)
Outplacement assistance services
which are at a level appropriate for senior management of a public
company; provided, however, that the total cost to the Company
shall not exceed twelve thousand dollars ($12,000.00).
Outplacement benefits shall be provided in kind; cash shall not be
paid in lieu thereof, nor will the cash severance benefits under
this Section 5 be increased if the Executive declines or
does not use the outplacement benefits. The provision
of outplacement assistance services shall cease after December 31st
of the second year following December 31st of the year in which the
Executive’s employment terminates.
If the Executive receives any
severance payments or benefits under this Agreement, he or she
shall not be entitled to receive any other severance payments or
benefits under any other e
