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Exhibit 10.3
LIMITED GUARANTEE
OF
PARTHENON INVESTORS II, L.P.
AND
INSURANCE AUTO AUCTIONS, INC.
LIMITED GUARANTEE, dated as of December 22, 2006 (this "
Limited Guarantee "), by Parthenon Investors II, L.P. ("
Parthenon ") and Insurance Auto Auctions, Inc. ("
IAAI " and together with Parthenon, the " Guarantors
"), in favor of ADESA, INC., a Delaware corporation (the "
Company "). On the date hereof, the Company has
entered into guarantees (the " Other Guarantees ") with (i)
ValueAct Capital Master Fund, L.P., (ii) GS Capital Partners VI,
L.P. (together with GS Capital Partners VI Parallel, L.P., GS
Capital Partners VI Offshore, L.P. and GS Capital Partners VI GmbH
& Co. KG) and (iii) Kelso Investment Associates VII, L.P. and
Insurance Auto Auctions, Inc. (collectively, the " Other
Guarantors ") on substantially similar terms, except as
otherwise expressly provided therein. Any capitalized term
not otherwise defined herein shall be as defined in the Merger
Agreement (as defined below).
1.
LIMITED GUARANTEE . To induce the
Company to enter into that certain Agreement and Plan of Merger,
dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, the " Merger Agreement "), by
and among the Company, KAR Holdings II, LLC, a 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 " and
together with Buyer and Holdings, the " Buyer Parties "),
the Guarantors, jointly and severally, absolutely, unconditionally
and irrevocably guarantees to the Company, on the terms and
conditions set forth herein, the prompt and complete payment, if
and when due of 7.8313% (the " Guaranteed Percentage ") of
the obligations of the Buyer Parties pursuant to and in accordance
with: (i) Section 8.3(d)(i) of the Merger Agreement with respect to
the Buyer Termination Fee; (ii) Section 8.3(d)(ii) of the Merger
Agreement with respect to the reimbursement of the Company
Transaction Expenses; and (iii) Section 8.3(d)(iii) of the Merger
Agreement with respect to the reimbursement of the Company
Financing Fees and Expenses and the Credit Facility Fees and
Expenses (the Guaranteed Percentage of the payment obligations
identified in clauses (i) through (iii) above, are collectively
referred to herein as the " Obligations "); provided
, that, notwithstanding anything herein to the contrary, in the
event that the Guarantors have actually paid the Guaranteed
Percentage of the Buyer Termination Fee pursuant to clause (i)
above or the Guaranteed Percentage of the Company Transaction
Expenses pursuant to clause (ii) above, the Guarantors shall have
no payment obligation with respect to the Company Financing Fees
and Expenses or the Credit Facility Fees and Expenses referenced in
clause (iii) above; and provided , further that the maximum
aggregate amount payable by the Guarantors under this Limited
Guarantee (exclusive of any amounts required to be paid by the
Guarantors pursuant to and in accordance with Section 16 hereof
(the " Prevailing Party Costs ")) shall not exceed the
aggregate of Three Million One Hundred Thirty Two Thousand and Five
Hundred Thirty U.S. Dollars (U.S.$ 3,132,530) (the " Cap ");
it being understood that this Limited Guarantee may not be enforced
without giving effect to the Cap. Except for Prevailing Party
Costs, the Company hereby agrees that in no event shall the
Guarantors be required to pay to any Person under, in respect of,
or in connection with this Limited Guarantee or the Merger
Agreement, more than the Cap, and that the Guarantors shall not
have any obligation or liability to any Person relating to, arising
out of or in connection with, this Limited Guarantee other than as
expressly set forth
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herein. Should either of the Buyer Parties
default in the prompt and complete payment or performance of the
Obligations, the Guarantors’ obligations hereunder shall
become immediately due and payable to the Company. The
Company shall provide Buyer and the Guarantors with reasonable
documentation, as applicable, of the Company Financing Fees and
Expenses and the Company Transaction Expenses and shall use
reasonable best efforts to provide Buyer with reasonable
documentation of the Credit Facility Fees and Expenses. All
sums payable by the Guarantors hereunder shall be made in
immediately available funds. The Company may, in its sole
discretion, bring and prosecute a separate action or actions
against the Guarantors for the full payment of the Obligations,
subject to the Cap (plus any Prevailing Party Costs), regardless of
whether the action is brought against one or both of the Buyer
Parties or any Other Guarantor or whether one or both of the Buyer
Parties or any Other Guarantor is joined in any such action or
actions. Notwithstanding anything to the contrary contained
in this Limited Guarantee or any other document, the obligations
(i) of the Guarantors under this Limited Guarantee shall be joint
and several, and (ii) of any Other Guarantor under any Other
Guarantee shall be several and not joint.
2.
NATURE OF LIMITED GUARANTEE .
(a)
The Company shall not be obligated to file any claim
relating to the Obligations in the event that one or both of the
Buyer Parties becomes subject to a bankruptcy, reorganization or
similar proceeding, and the failure of the Company to so file shall
not affect the Guarantors’ obligations hereunder. In
the event that any payment to the Company in respect of the
Obligations is rescinded or must otherwise be returned for any
reason whatsoever, the Guarantors shall remain liable hereunder
with respect to the Obligations (plus any Prevailing Party Costs)
as if such payment had not been made (subject to the terms
hereof). This is an unconditional guarantee of payment and
not of collectibility. Notwithstanding any other provision of
this Limited Guarantee, the Company hereby agrees that (i) the
Guarantors may assert, as a defense to any payment or performance
by the Guarantors under this Limited Guarantee, any defense to such
payment or performance that the Buyer Parties could assert against
the Company under the terms of the Merger Agreement, other than any
such defense arising out of, due to, or as a result of, the
insolvency or bankruptcy of any Buyer Party or any of the Other
Guarantors, or any defense based upon a claim of fraudulent
conveyance and similar laws of general applicability relating to
creditors rights; and (ii) to the extent the Buyer Parties are
relieved by the parties to the Merger Agreement (including the
Company) of their obligations under Section 8.3(d) of the Merger
Agreement, the Guarantors shall be similarly relieved of their
Obligations under this Limited Guarantee.
(b)
The Company hereby acknowledges and agrees that, as
of the date hereof, each of the Buyer Parties’ sole assets
are a de minimis amount of cash and their respective rights
under the Merger Agreement, and that no additional funds or assets
are expected to be contributed to the Buyer Parties, except as
contemplated by the Merger Agreement in connection with the
Closing.
(c)
Notwithstanding anything that may be expressed or
implied in this Limited Guarantee or any document or instrument
delivered contemporaneously herewith, and notwithstanding the fact
that either of the Guarantors may be a partnership or limited
liability company, by its acceptance of the benefits of this
Limited Guarantee, the Company covenants and agrees that (i)
neither the Company nor any of its Subsidiaries or Affiliates, and
the Company agrees to the maximum extent permitted by Law, none of
its officers, directors,
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security holders or representatives, has or shall
have any right of recovery under the Merger Agreement or the
transactions contemplated thereby, and to the extent that it has or
obtains any such right, it, to the maximum extent permitted by Law,
hereby waives (on its own behalf and on behalf of each of the
aforementioned persons) each and every such right against, and
hereby releases, and no personal liability shall attach to, the
Guarantors or any of the Sponsor Affiliates (as defined below),
from and with respect to any claim, known or unknown, now existing
or hereafter arising, relating to the Merger Agreement or the
transactions contemplated thereby, whether by or through attempted
piercing of the corporate (or limited liability company or limited
partnership) veil, or by or through a claim by or on behalf of any
Buyer Party (or any other Person) against any Sponsor Affiliate
(including, without limitation, a claim to enforce the Equity
Commitment Letters) (the " Released Claims "), except for
its rights to recover from the Guarantors (but not any Sponsor
Affiliate, under and to the extent provided in this Limited
Guarantee (subject to the limitations described herein)), and its
rights against the Other Guarantors pursuant to the terms of the
Other Guarantees; and (ii) recourse against the Guarantors under
this Limited Guarantee (subject to the limitations described
herein) and against the Other Guarantors pursuant to the Other
Guarantees shall be the sole and exclusive remedy of the Company
and all of its Subsidiaries and Affiliates against the Guarantors
and each Sponsor Affiliate in respect of any liabilities or
obligations arising under the Merger Agreement or the transactions
contemplated thereby. For purposes of this Limited Guarantee, "
Sponsor Affiliate " means, collectively, any former, current
or future director, officer, employee, agent, general or limited
partner, manager, member, stockholder, Affiliate or assignee of the
undersigned or any Sponsor Affiliate or any former, current or
future director, officer, employee, agent, general or limited
partner, manager, member, stockholder, Affiliate or assignee of any
of the foregoing; provided, that, if the Person is an Other
Guarantor, such Person shall also have such obligations to Company
as are set forth in the Other Guarantee of such Person.
(d)
The Company hereby covenants and agrees that it
shall not institute, directly or indirectly, and shall cause its
Subsidiaries and controlled Affiliates not to institute, in the
name of or on behalf of the Company or any other Person, any
proceeding or bring any other claim arising under the Merger
Agreement or the transactions contemplated thereby, against the
Guarantors or the Sponsor Affiliates except for claims against the
Guarantors under this Limited Guarantee (subject to the limitations
described herein), any claims against any Sponsor Affiliate that is
an Other Guarantor under an Other Guarantee, any claims for
equitable relief permitted under Section 9.12 of the Merger
Agreement, or any claims permitted under the Confidentiality
Agreement.
(e)
The Company acknowledges that the Guarantors are
agreeing to enter into this Limited Guarantee in reliance on the
provisions set forth in Sections 2(b) through (e). Sections 2(b),
2(c), 2(d) and 2(e) shall survive termination of this Limited
Guarantee.
3.
CHANGES IN OBLIGATIONS; CERTAIN WAIVERS
. The Guarantors agree that the Company may at any time and
from time to time, without notice to or further consent of the
Guarantors, extend the time of payment of any of the Obligations,
and also may make any agreement with one or both of the Buyer
Parties or any Other Guarantor for the extension, renewal, payment,
compromise, discharge or release thereof, in whole or in part, or
for any modification of the terms thereof or of any agreement
between the Company, on the one hand, and one or both of the Buyer
Parties or any Other Guarantor, on the other hand, without in any
way impairing or affecting the Guarantors’ obligations under
this Limited Guarantee. The
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Guarantors agree that the obligations of the
Guarantors hereunder shall not be released or discharged, in whole
or in part, or otherwise affected by: (a) the failure of the
Company to assert any claim or demand or to enforce any right or
remedy against one or both of the Buyer Parties or any Other
Guarantor; (b) any change in the time, place or manner of
payment of any of the Obligations or any rescission, waiver,
compromise, consolidation or other amendment or modification of any
of the terms or provisions of the Merger Agreement, any Other
Guarantee, or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations (provided that
any such change, rescission, waiver, compromise, consolidation or
other amendment or modification shall be subject to the prior
written consent of the Buyer Parties to the extent expressly
required by the Merger Agreement or to the prior written consent of
any of the applicable Other Guarantors, to the extent expressly
required by any of the Other Guarantees); (c) the addition,
substitution or release of any Person interested in the
transactions contemplated by t
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