Exhibit 10.4
LIMITED GUARANTEE
OF
VALUEACT CAPITAL MASTER FUND, L.P.
LIMITED GUARANTEE, dated as of
December 22, 2006 (this “ Limited Guarantee ”),
by ValueAct Capital Master Fund, L.P. (“ Guarantor
”), 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) 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), (ii) Parthenon Investors II, L.P. and Insurance Auto
Auctions, Inc. 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 Guarantor 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
28.3133% (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 Guarantor has 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, Guarantor 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 Guarantor under
this Limited Guarantee (exclusive of any amounts required to be
paid by Guarantor pursuant to and in accordance with Section 16
hereof (the “ Prevailing Party Costs ”)) shall
not exceed the aggregate of Eleven Million Three Hundred Twenty
Five Thousand and Three Hundred One U.S. Dollars (U.S.$11,325,301)
(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 Guarantor 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
Guarantor 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 herein. Should
either of the Buyer Parties default in the prompt and complete
payment or performance of the Obligations, the
Guarantor’s
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obligations hereunder shall become immediately
due and payable to the Company. The Company shall provide
Buyer and Guarantor 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 Guarantor
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 Guarantor 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 of the Guarantor under this Limited Guarantee and 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 Guarantor’s
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 Guarantor
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 Guarantor may assert, as a
defense to any payment or performance by the Guarantor 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 Guarantor shall be
similarly relieved of its 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 the Guarantor 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, security holders
or
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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
Guarantor 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 the
Buyer Parties (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 Guarantor (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 Guarantor 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 Guarantor
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 Guarantor or the Sponsor
Affiliates except for claims against the Guarantor 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 Guarantor is 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 Guarantor agrees
that the Company may at any time and from time to time, without
notice to or further consent of the Guarantor, 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
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way impairing or affecting the Guarantor’s
obligations under this Limited Guarantee. The Guarantor
agrees that the obligations of the Guarantor 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
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