UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 28, 2019


KAR Auction Services, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
001-34568
20-8744739
(State or other jurisdiction
of incorporation)
(Commission File Number)
 
(I.R.S. Employer
Identification No.)
     
13085 Hamilton Crossing Boulevard Carmel, Indiana
46032
(Address of principal executive offices)
(Zip Code)
     
 
(800) 923-3725
 
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



 Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
KAR
New York Stock Exchange


Item 1.01 Entry into a Material Definitive Agreement.

Separation-Related Agreements

On June 27, 2019, KAR Auction Services, Inc. (“KAR”) entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”) with IAA, Inc. (f/k/a IAA Spinco Inc.), a wholly owned subsidiary of KAR at that time (“IAA”), that sets forth, among other things, certain agreements between KAR and IAA regarding the principal transactions necessary to effect the separation of IAA from KAR and the distribution (as described below). On June 27, 2019, in connection with the completion of the separation and distribution, KAR entered into certain other agreements with IAA as contemplated by the Separation and Distribution Agreement that provide for the separation and allocation between KAR and IAA of the assets, employees, liabilities and obligations of KAR and its subsidiaries attributable to periods prior to, at and after IAA’s separation from KAR and govern the relationship between KAR and IAA subsequent to the completion of the separation and distribution. These agreements include:


●
a Transition Services Agreement;


●
a Tax Matters Agreement; and


●
an Employee Matters Agreement.

The description of the agreements set forth under this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the complete terms and conditions of those agreements, which are attached hereto as Exhibits 2.1, 10.1, 10.2 and 10.3.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Effective as of 12:01 a.m., Eastern Daylight Time (“EDT”), on June 28, 2019, the distribution date, KAR distributed all of the issued and outstanding shares of IAA common stock to KAR’s common stockholders of record as of 5:00 pm EDT on June 18, 2019, the record date for the distribution, on a pro rata basis. On the distribution date, each KAR common stockholder of record received one share of IAA common stock for every one share of KAR common stock held by such stockholder as of the record date. No fractional shares of IAA’s common stock were distributed. Fractional shares of IAA’s common stock were aggregated and sold in the public market, and the aggregate net cash proceeds of these sales were distributed pro rata to KAR common stockholders who would otherwise have been entitled to receive fractional shares of IAA’s common stock. As a result of the distribution, KAR does not beneficially own any shares of IAA common stock. The separation and distribution resulted in IAA becoming an independent, publicly traded company, trading on the New York Stock Exchange under the symbol “IAA.”

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Effective as of 11:59 p.m., EDT, on June 27, 2019, the time of the separation, Lynn Jolliffe and John P. Larson each resigned as a director of KAR. Ms. Jolliffe and Mr. Larson are now directors of IAA. KAR intends to fill the vacancies created by the resignations at the next meeting of its board of directors in July 2019.

Item 8.01 Other Events.

On June 28, 2019, KAR issued a press release announcing the completion of the separation and distribution. A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

     
Exhibit No.
 
Description
   
 
Separation and Distribution Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.†
   
 
Transition Services Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
   
 
Tax Matters Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
   
 
Employee Matters Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
   
 
Press Release of KAR Auction Services, Inc., dated as of June 28, 2019.

† Certain information has been excluded from this exhibit because it is not material and would likely cause competitive harm to the registrant if publicly disclosed.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

     
 
KAR Auction Services, Inc.
     
 
By:
/s/ Eric M. Loughmiller
 
Name:
Eric M. Loughmiller
 
Title:
Executive Vice President and Chief Financial Officer
     
Dated: June 28, 2019

Exhibit 2.1


CERTAIN INFORMATION HAS BEEN EXCLUDED F ROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL
AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.
[***] INDICATES THAT INFORMATION HAS BEEN REDACTED.

SEPARATION AND DISTRIBUTION AGREEMENT

BY AND BETWEEN

KAR AUCTION SERVICES, INC.

AND

IAA, INC.

DATED AS OF JUNE 27, 2019



TABLE OF CONTENTS
Page

Article I

DEFINITIONS

Article II

THE SEPARATION

2.1
General
17
2.2
Internal Restructuring; Transfer of Assets and Assumption of Liabilities.
17
2.3
SpinCo Assets; KAR Assets
19
2.4
SpinCo Liabilities; KAR Liabilities
22
2.5
Approvals and Notifications
23
2.6
Novation of Liabilities
26
2.7
Release of Guarantees
27
2.8
Termination of Agreements
28
2.9
Treatment of Shared Contracts
29
2.10
Bank Accounts; Cash Balances
30
2.11
Ancillary Agreements
31
2.12
Disclaimer of Representations and Warranties
31
2.13
Financing Arrangements
32
2.14
Solvency and Liquidity
32
2.15
SpinCo Contribution
32

Article III

THE DISTRIBUTION


3.1
Sole and Absolute Discretion; Cooperation
33
3.2
Actions Prior to the Distribution
33
3.3
Conditions to the Distribution
34
3.4
The Distribution
36

Article IV

MUTUAL RELEASES; INDEMNIFICATION

4.1
Release of Pre-Distribution Claims
37
4.2
Indemnification by SpinCo
39
4.3
Indemnification by KAR
40
4.4
Indemnification Obligations Net of Insurance Proceeds and Other Amounts
41
4.5
Procedures for Indemnification of Third-Party Claims
42
4.6
Additional Matters
44
4.7
Right of Contribution
45
4.8
Covenant Not to Sue
46
4.9
Remedies Cumulative
46
4.10
Survival of Indemnities
46
4.11
Tax Matters Agreement Governs
46
4.12
Employee Matters Agreement Governs
46

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Article V

CERTAIN OTHER MATTERS

5.1
Insurance Matters
46
5.2
Continuation of Director and Officer Insurance
49
5.3
Late Payments
49
5.4
Treatment of Payments for Tax Purposes
49
5.5
Inducement
49
5.6
Post-Effective Time Conduct
49
5.7
Restricted Businesses
50

Article VI

EXCHANGE OF INFORMATION; CONFIDENTIALITY

6.1
Agreement for Exchange of Information
50
6.2
Ownership of Information
51
6.3
Compensation for Providing Information
51
6.4
Record Retention
51
6.5
Limitations of Liability
52
6.6
Other Agreements Providing for Exchange of Information
52
6.7
Production of Witnesses; Records; Cooperation
53
6.8
Privileged Matters
54
6.9
Confidentiality
56
6.10
Protective Arrangements
57


Article VII

DISPUTE RESOLUTION

7.1
Good-Faith Officer Negotiation
58
7.2
Good-Faith CEO Negotiation
58
7.3
Resolution by Delaware Courts.
58
7.4
Conduct During Dispute Resolution Process
59


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Article VIII

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

8.1
Further Assurances
59
8.2
KAR Names
60


Article IX

TERMINATION

9.1
Termination
60
9.2
Effect of Termination
61

Article X

MISCELLANEOUS

10.1
Counterparts; Entire Agreement; Corporate Power
61
10.2
Governing Law
62
10.3
Assignability
62
10.4
Third-Party Beneficiaries
62
10.5
Notices
62
10.6
Severability

 63
10.7
Force Majeure

 64
10.8
No Set-Off

 64
10.9
Publicity

 64
10.10
Expenses

 64
10.11
Headings

 65
10.12
Survival of Covenants

 65
10.13
Waivers of Default

 65
10.14
Specific Performance

 65
10.15
Amendments

 65
10.16
Interpretation

 65
10.17
Limitations of Liability

 66
10.18
Performance

 66
10.19
Mutual Drafting

 66

EXHIBITS

Exhibit A
SpinCo Certificate of Incorporation
Exhibit B
SpinCo Bylaws
Exhibit C
Restricted Businesses


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SCHEDULES

Schedule 1.1
KAR Marks
Schedule 1.2
SpinCo Discontinued or Divested Businesses
Schedule 1.3
SpinCo Contracts
Schedule 1.4
SpinCo Intellectual Property
Schedule 1.5(i)
Owned Real Property
Schedule 1.5(ii)
Leased Real Property
Schedule 1.6
SpinCo Technology
Schedule 1.7
Transferred Entities
Schedule 2.1
Internal Restructuring
Schedule 2.3(a)(xi)
SpinCo Assets
Schedule 2.3(b)(vii)
KAR Intellectual Property
Schedule 2.3(b)(x)
KAR Assets
Schedule 2.4(a)(vi)
SpinCo Liabilities
Schedule 2.4(b)
KAR Liabilities
Schedule 2.8(b)(ii)
Intercompany Agreements
Schedule 2.9(b)
Shared Contracts to be Assigned to SpinCo
Schedule 4.3(f)
Specified KAR Information















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SEPARATION AND DISTRIBUTION AGREEMENT

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of June 27, 2019 (this “ Agreement ”), is made and entered into by and between KAR Auction Services, Inc., a Delaware corporation (“ KAR ”), and IAA, Inc., a Delaware corporation and wholly owned subsidiary of KAR (“ SpinCo ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in Article I .

R E C I T A L S

WHEREAS, the board of directors of KAR (the “ KAR Board ”) has determined that it is advisable and in the best interests of KAR and KAR’s stockholders to separate KAR’s salvage auction businesses from its whole car auction businesses, creating two independent publicly traded companies;

WHEREAS, in furtherance of the foregoing, (a) KAR will cause the applicable members of the KAR Group to assign, transfer, convey and deliver to SpinCo or the applicable SpinCo Designee all right, title and interest of the KAR Group in and to the SpinCo Assets, (b) SpinCo and the applicable SpinCo Designees will accept, assume and agree faithfully to perform, discharge and fulfill the SpinCo Liabilities (the transactions described in clauses (a) and (b) herein being referred to collectively as the “ SpinCo Contribution ”), (c) SpinCo will cause the applicable members of the SpinCo Group to assign, transfer, convey and deliver to KAR or the applicable KAR Designee all right, title and interest of the SpinCo Group in and to the KAR Assets, and (d) KAR and the applicable KAR Designees will accept, assume and agree faithfully to perform, discharge and fulfill the KAR Liabilities (the transactions described in this recital, including the assignment, transfer, conveyance and delivery of the SpinCo Assets and KAR Assets, and the acceptance, assumption and agreement to perform the SpinCo Liabilities and KAR Liabilities, being referred to collectively as the “ Separation ”);

WHEREAS, in order to effect the Separation, KAR shall undertake the Internal Restructuring, effect the SpinCo Contribution and, in exchange for the SpinCo Contribution, SpinCo shall (i) issue to KAR certain SpinCo Shares (as defined herein) and (ii) distribute to KAR cash in the aggregate amount of $1,277,964,054 (the “ Cash Distribution ”);

WHEREAS, following the completion of the Internal Restructuring and the Separation, KAR shall distribute all of the issued and outstanding SpinCo Shares to holders of KAR Shares on the Record Date, on a pro rata basis, and shall use the Cash Distribution to repay certain of its creditors (the “ Distribution ”);

WHEREAS, SpinCo has been incorporated solely for the purposes described herein and has not engaged in activities except in connection with the Separation, the SpinCo Contribution and the Distribution;

WHEREAS, for U.S. federal income tax purposes, the Separation and the Distribution, taken together, are intended to qualify as a transaction that is tax-free under Sections 368(a)(1)(D) and 355 of the Code;
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WHEREAS, this Agreement is intended to be, and is hereby adopted as, a “plan of reorganization” within the meanings of Treasury Regulations Section 1.368-2(g);

WHEREAS, KAR has received the IRS Ruling;

WHEREAS, KAR expects to receive an opinion of outside legal counsel regarding the qualification of the Separation and the Distribution, taken together, under Sections 368(a)(1)(D) and 355 of the Code;

WHEREAS, SpinCo and KAR have prepared, and SpinCo has filed with the SEC, the Form 10, which includes the Information Statement, and which sets forth information concerning SpinCo, the Separation and the Distribution;

WHEREAS, KAR and SpinCo desire to set forth the principal corporate transactions required to effect the Separation and the Distribution and certain other agreements governing various matters relating to the Separation and the Distribution and the relationship of KAR, SpinCo and the members of their respective Groups following the Distribution; and

WHEREAS, KAR and SpinCo acknowledge that this Agreement and the Ancillary Agreements represent the integrated agreement of KAR and SpinCo relating to the Internal Restructuring, the Separation and the Distribution, are being entered into together and would not have been entered into independently.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, the following terms shall have the following meanings:

“ Action ” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any Governmental Authority.

“ Affiliate ” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For purposes of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, prior to, at and after the Effective Time, for purposes of this Agreement and the Ancillary Agreements, (a) no member of the SpinCo Group shall be deemed to be an Affiliate of any member of the KAR Group and (b) no member of the KAR Group shall be deemed to be an Affiliate of any member of the SpinCo Group.
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“ Agent ” shall mean the trust company or bank duly appointed by KAR to act as distribution agent, transfer agent and registrar for the SpinCo Shares in connection with the Distribution.

“ Agreement ” shall have the meaning set forth in the Preamble.

“ Ancillary Agreements ” shall mean any and all agreements (other than this Agreement) entered into by the Parties or the members of their respective Groups (but as to which no Third Party is a party) in connection with the Internal Restructuring, the Separation, the Distribution, or the other transactions contemplated by this Agreement, including the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Transfer Documents and all other agreements listed on Schedule 1.1.

“ Approvals or Notifications ” shall mean any and all consents, waivers, approvals, permits or authorizations that KAR determines are required to be obtained from, and any notices, registrations or reports that KAR determines are required to be submitted to, or other filings that KAR determines are required to be made with, any Third Party, including any Governmental Authority, in connection with the Internal Restructuring, the Separation, the Distribution or the consummation of the transactions contemplated hereby.

“ Assets ” shall mean, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other Third Parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including rights and benefits pursuant to any contract, license, permit, indenture, note, bond, mortgage, agreement, concession, franchise, instrument, undertaking, commitment, understanding or other arrangement.

“ Cash Distribution ” shall have the meaning set forth in the Recitals.

“ CEO Notice ” shall have the meaning set forth in Section 7.2 .

“ Change of Control ” shall mean, with respect to a Person, directly or indirectly,  (i) any consolidation, merger or similar business combination involving such Person in which the holders of voting securities of such Person immediately prior thereto are not the holders of a majority in interest of the voting securities of the surviving Person in such transaction, (ii) any sale, lease, license, disposition or conveyance to a third party of all or substantially all of the consolidated assets of such Person in one transaction or a series of related transactions;  or (iii) any acquisition  by any third party or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on the date hereof) of at least 50% of the aggregate ownership interests, directly or indirectly, beneficially or of record, of such Person, having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such Person, in one transaction or a series of related transactions.
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“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Delayed KAR Asset ” shall have the meaning set forth in Section 2.5(h) .

“ Delayed KAR Liability ” shall have the meaning set forth in Section 2.5(h) .

“ Delayed SpinCo Asset ” shall have the meaning set forth in Section 2.5(c) .

“ Delayed SpinCo Liability ” shall have the meaning set forth in Section 2.5(c) .

“ Disclosure Document ” shall mean any registration statement (including the Form 10) filed with the SEC by or on behalf of any Party or any member of such Party’s Group, and also includes any information statement (including the Information Statement), prospectus, offering memorandum, offering circular, periodic report or similar disclosure document, whether or not filed with the SEC or any other Governmental Authority, in each case, that describes the Separation, the Distribution or the SpinCo Group or primarily relates to the transactions contemplated hereby.

“ Dispute ” shall have the meaning set forth in Section 7.1 .

“ Distribution ” shall have the meaning set forth in the Recitals.

“ Distribution Date ” shall mean the date of the consummation of the Distribution, which shall be determined by the KAR Board in its sole and absolute discretion.

“ Effective Time ” shall mean 12:01 a.m., New York City time, on the Distribution Date.

“ Employee Matters Agreement ” shall mean the Employee Matters Agreement to be entered into by and between KAR and SpinCo and/or one or more members of their respective Groups in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

“ Environmental Law ” shall mean any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, or protection of human health, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

“ Environmental Liabilities ” shall mean all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take back requirements or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

“ Exchange Act ” shall mean the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
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“ Existing KAR Credit Facility ” shall mean the Amendment and Restatement Agreement, dated as of March 11, 2014 (including the Amended and Restated Credit Agreement and the Amended and Restated Guarantee and Collateral Agreement included as exhibits thereto), as amended, among KAR Auction Services, Inc., as borrower, certain of KAR Auction Services, Inc.’s subsidiaries, as guarantors, and JPMorgan Chase Bank, N.A., as administrative agent, issuing lender and swingline lender.

“ Final Determination ” shall have the meaning set forth in the Tax Matters Agreement.

“ Force Majeure ” shall mean, with respect to a Party, an event beyond the control of such Party (or any Person acting on such Party’s behalf), which event (a) does not arise or result from the fault or negligence of such Party (or any Person acting on such Party’s behalf) and (b) by its nature would not reasonably have been foreseen by such Party (or any Person acting on such Party’s behalf), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

“ Form 10 ” shall mean the registration statement on Form 10 filed by SpinCo with the SEC to effect the registration of SpinCo Shares pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Distribution.

“ Governmental Approvals ” shall mean any and all Approvals or Notifications that KAR determines are required to be made to, or obtained from, any Governmental Authority.

“ Governmental Authority ” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

“ Group ” shall mean either the SpinCo Group or the KAR Group, as the context requires.

“ Hazardous Materials ” shall mean any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in Liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.

“ Indemnifying Party ” shall have the meaning set forth in Section 4.4(a) .
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“ Indemnitee ” shall have the meaning set forth in Section 4.4(a) .

“ Indemnity Payment ” shall have the meaning set forth in Section 4.4(a) .

“ Information ” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data; provided that “Information” shall not include Registrable IP.

“ Information Statement ” shall mean the information statement, which will be sent, or of which a notice of internet availability will be provided, to the holders of KAR Shares in connection with the Distribution, as such information statement may be amended or supplemented from time to time prior to the Distribution.

“ Initial Notice ” shall have the meaning set forth in Section 7.1 .

“ Insurance Proceeds ” shall mean those monies (i) received by an insured from an insurance carrier, or (ii) paid by an insurance carrier on behalf of the insured, in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

“ Intellectual Property ” shall mean all of the following whether arising under the Laws of the United States or of any other foreign or multinational jurisdiction: (a) patents, patent applications (including patents issued thereon) and statutory invention registrations, including reissues, divisions, continuations, continuations in part, substitutions, renewals, extensions and reexaminations of any of the foregoing, and all rights in any of the foregoing provided by international treaties or conventions, (b) trademarks, service marks, trade names, service names, trade dress, logos and other source or business identifiers, including all goodwill associated with any of the foregoing, and any and all common law rights in and to any of the foregoing, registrations and applications for registration of any of the foregoing, all rights in and to any of the foregoing provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing, (c) Internet domain names, registrations and related rights, (d) copyrightable works, copyrights, moral rights, mask work rights, database rights and design rights, in each case, other than Software, whether or not registered, and all registrations and applications for registration of any of the foregoing, and all rights in and to any of the foregoing provided by international treaties or conventions, (e) confidential and proprietary information, including trade secrets, invention disclosures, processes and know-how, in each case, other than Software, and (f) intellectual property rights arising from or in respect of any Technology.

“ Internal Restructuring ” shall mean the transactions and arrangements set forth in Schedule 2.1 , as may be amended from time to time by KAR in its sole discretion.

“ IRS ” shall mean the United States Internal Revenue Service.
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“ IRS Ruling ” shall mean a private letter ruling from the IRS addressing the tax consequences of certain aspects of the Separation and the Distribution.

“ KAR ” shall have the meaning set forth in the Preamble.

“ KAR Accounts ” shall have the meaning set forth in Section 2.10(a) .

“ KAR Assets ” shall have the meaning set forth in Section 2.3(b) .

“ KAR Board ” shall have the meaning set forth in the Recitals.

“ KAR Business ” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Effective Time by either Party or any member of its Group, other than the SpinCo Business.

“ KAR Designees ” shall mean any and all entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) designated by KAR that will be members of the KAR Group as of immediately after the Effective Time.

“ KAR Group ” shall mean KAR and each Person that is a Subsidiary of KAR (other than SpinCo and any other member of the SpinCo Group).

“ KAR Indemnitees ” shall have the meaning set forth in Section 4.2 .

“ KAR Liabilities ” shall have the meaning set forth in Section 2.4(b) .

“ KAR Marks ” shall mean the trademarks, trade names, service names, trade dress, logos and other source or business identifiers comprising or containing “KAR”, “ADESA”, “AFC” or any other term or element listed on Schedule 1.2 , either alone or in combination with other terms or elements, and all allocated logos and trade dress, and all names, marks, domain names, social media accounts and handles and other source or business identifiers confusingly similar to or embodying any of the foregoing either alone or in combination with other terms or elements, and any registrations or applications for any of the foregoing, together with the goodwill associated with any of the foregoing.

“ KAR Shares ” shall mean the shares of common stock, par value $0.01 per share, of KAR.

“ Law ” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

“ Leased Real Property ” shall mean the real property in which either Party or any of the members of its Group hold valid leasehold or subleasehold interests and any other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interests in real property held by either Party or any of the members of its Group as of the Effective Time under the Real Property Leases.
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“ Liabilities ” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, settlements, sanctions, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any equitable relief that is imposed, in each case, including all costs and expenses relating thereto. Except as otherwise specifically set forth herein or in the Tax Matters Agreement, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement and, therefore, Taxes shall not be treated as Liabilities for purposes of this Agreement.

“ Linked ” shall have the meaning set forth in Section 2.10(a) .

“ Losses ” shall mean actual losses, costs, damages, fines, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

“ NYSE ” shall mean the New York Stock Exchange.

“ Other IP ” shall mean all Intellectual Property, other than Registrable IP, that is owned by either Party or any member of its Group as of the Effective Time.

“ Owned Real Property ” shall mean the real property that is owned by either Party or any of the members of such Party’s Group as of the Effective Time, together with all buildings, improvements and structures thereon.

“ Parties ” shall mean the parties to this Agreement.

“ Permits ” means permits, approvals, authorizations, consents, licenses or certificates issued by any Governmental Authority.

“ Person ” shall mean an individual, a corporation, a general or limited partnership, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

“ Prime Rate ” shall mean the rate that Bloomberg (or any successor thereto) displays as “Prime Rate by Country United States” at https://www.bloomberg.com/quote/PRIME:IND or on a Bloomberg terminal at PRIMBB Index.

“ Privileged Information ” means any information, in written, oral, electronic or other tangible or intangible form, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a Party or any member of such Party’s Group would be entitled to assert or has asserted a privilege, including the attorney-client and attorney work product privileges.
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“ Real Property Leases ” shall mean the real property leases, subleases, licenses or other agreements, including all amendments, modifications, supplements, extensions, renewals, guaranties or other agreements with respect thereto, pursuant to which either Party or any of the members of its Group as of the Effective Time is a party.

“ Record Date ” shall mean the close of business on the date to be determined by the KAR Board as the record date for determining holders of KAR Shares entitled to receive SpinCo Shares pursuant to the Distribution.

“ Record Holders ” shall mean the holders of record of KAR Shares as of the Record Date.

“ Registrable IP ” shall mean all patents, patent applications, statutory invention registrations, trademark and service mark registrations and applications, registered Internet domain names and copyright registrations and applications.

“ Release ” shall mean any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including, ambient air, surface water, groundwater and surface or subsurface strata).

“ Representatives ” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

“ SEC ” shall mean the U.S. Securities and Exchange Commission.

“ Security Interest ” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

“ Separation ” shall have the meaning set forth in the Recitals.

“ Shared Contract ” shall have the meaning set forth in Section 2.9(a) .

“ Software ” shall mean any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, (d) screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (e) documentation, including user manuals and other training documentation, relating to any of the foregoing.

“ SpinCo ” shall have the meaning set forth in the Preamble.
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“ SpinCo Accounts ” shall have the meaning set forth in Section 2.10(a) .

“ SpinCo Assets ” shall have the meaning set forth in Section 2.3(a) .

“ SpinCo Balance Sheet ” shall mean the pro forma combined balance sheet of the SpinCo Business, including any notes thereto, as of March 31, 2019, as presented in the Information Statement.

“ SpinCo Business ” shall mean (a) the business, operations and activities of the IAA segment of KAR, as disclosed in KAR’s Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019, conducted at any time prior to the Effective Time by either Party or any of their current or former Subsidiaries and (b) any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to (i) the business, operations or activities described in clause (a) as then conducted or (ii) any other business operations or activities previously conducted as part of the salvage auction businesses of KAR and its Subsidiaries, including those set forth on Schedule 1.3 .

“ SpinCo Bylaws ” shall mean the Amended and Restated Bylaws of SpinCo, substantially in the form of Exhibit B .

“ SpinCo Certificate of Incorporation ” shall mean the Amended and Restated Certificate of Incorporation of SpinCo, substantially in the form of Exhibit A .

“ SpinCo Contracts ” shall mean all contracts and agreements set forth on Schedule 1.4 , and any other contracts or agreements to which either Party or any member of its Group is a party or by which it or any member of its Group or any of their respective Assets is bound, whether or not in writing, as of the Effective Time that relate exclusively to the SpinCo Business, including the following:

(a)            any customer, distribution, supply or vendor contract or agreement that relates exclusively to the SpinCo Business;

(b)            any contract or agreement in the nature of a guarantee, indemnity or other Liability of either Party or any member of its Group in respect of any other SpinCo Contract, any SpinCo Liability or the SpinCo Business;

(c)            any Real Property Lease that relates exclusively to the SpinCo Business;

(d)            any lease (including any capital lease), agreement to lease, option to lease, license, right to use, installment or conditional sale agreement pertaining to the leasing or use of any equipment or other tangible property that relates exclusively to the SpinCo Business;

(e)            any contract or agreement licensing or otherwise granting rights to Intellectual Property that relates exclusively to the SpinCo Business; and
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(f)            any other contract or agreement that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be allocated or assigned to SpinCo or any member of the SpinCo Group.

 Notwithstanding the foregoing, except with respect to any such contract or agreements that are expressly set forth on Schedule 1.4 , SpinCo Contracts shall not include any contract or agreement that is contemplated to be retained by KAR or any member of the KAR Group from and after the Effective Time pursuant to any provision of this Agreement or any Ancillary Agreement.

“ SpinCo Contribution ” shall have the meaning set forth in the Recitals.

“ SpinCo Credit Facility ” shall mean the Credit Agreement to be entered into by and among SpinCo, as borrower, certain subsidiaries of SpinCo, identified therein, as guarantors, a nationally recognized banking institution, and the lenders party thereto.

“ SpinCo Designees ” shall mean any and all entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) designated by SpinCo that will be members of the SpinCo Group as of immediately after the Effective Time.

“ SpinCo FF&E ” shall have the meaning set forth in Section 2.3(a)(vi) .

“ SpinCo Group ” shall mean (a) prior to the Effective Time, SpinCo and each Person that will be a Subsidiary of SpinCo as of immediately after the Effective Time, including the Transferred Entities, even if, prior to the Effective Time, such Person is not a Subsidiary of SpinCo; and (b) on and after the Effective Time, SpinCo and each Person that is a Subsidiary of SpinCo.

“ SpinCo Indemnitees ” shall have the meaning set forth in Section 4.3 .

“ SpinCo Intellectual Property ” shall mean (a) the Registrable IP set forth on Schedule 1.5   and (b) all Other IP owned by either Party or any member of its Group as of the Effective Time exclusively used or exclusively held for use in the SpinCo Business, including any Other IP set forth on Schedule 1.5 .

“ SpinCo Liabilities ” shall have the meaning set forth in Section 2.4(a) .

“ SpinCo Notes ” shall mean the 5.500% Senior Notes due 2027 issued by SpinCo.

“ SpinCo Permits ” shall mean all Permits in the possession of either Party or member of its Group exclusively used or exclusively held for use in the SpinCo Business as of the Effective Time.

“ SpinCo Real Property ” shall mean (i) the Owned Real Property set forth on Schedule 1.6(i) , and (ii) the Leased Real Property set forth on Schedule 1.6(ii) .
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“ SpinCo Shares ” shall mean the shares of common stock, par value $0.01 per share, of SpinCo.

“ SpinCo Software ” shall mean all Software owned by either Party or any member of such Party’s Group exclusively used or exclusively held for use in the SpinCo Business as of the Effective Time.

“ SpinCo Technology ” shall mean all Technology owned by either Party or any member of its Group exclusively used or exclusively held for use in the SpinCo Business as of the Effective Time, including the Technology set forth on Schedule 1.7 .

“ Subsidiary ” shall mean, with respect to any Person, any corporation, general or limited partnership, trust, joint venture, unincorporated organization, limited liability company or other entity of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) in the case of a partnership, is a general partner, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

“ Tangible Information ” means information that is contained in written, electronic or other tangible forms.

“ Tax ” shall have the meaning set forth in the Tax Matters Agreement.

“ Tax Matters Agreement ” shall mean the Tax Matters Agreement to be entered into by and between KAR and SpinCo and/or one or more members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement.

“ Tax Return ” shall have the meaning set forth in the Tax Matters Agreement.

“ Technology ” shall mean all technology, designs, formulae, algorithms, procedures, methods, discoveries, processes, techniques, ideas, know-how, research and development, technical data, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship in any media, confidential, proprietary or nonpublic information, and other similar materials, and all recordings, graphs, drawings, reports, analyses and other writings, and other tangible embodiments of the foregoing in any form whether or not listed herein, in each case, other than Software.

“ Third Party ” means any Person other than the Parties or any members of their respective Groups.

“ Third-Party Claim ” shall have the meaning set forth in Section 4.5(a) .

“ Transfer Documents ” shall have the meaning set forth in Section 2.2(c) .

“ Transferred Entities ” shall mean the entities set forth on Schedule 1.8 .
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“ Transition Services Agreement ” shall mean the Transition Services Agreement to be entered into by and between KAR and SpinCo and/or any members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement.

“ Treasury Regulations ” shall mean the tax regulations issued by the IRS.

“ Unreleased SpinCo Liability ” shall have the meaning set forth in Section 2.6(a)(ii) .

“ Unreleased KAR Liability ” shall have the meaning set forth in Section 2.6(b)(ii) .

ARTICLE II

THE SEPARATION

     
        2.1      General .  Subject to the terms and conditions of this Agreement, the Parties shall use, and shall cause their respective Affiliates to use, their respective commercially reasonable efforts to consummate the transactions contemplated hereby, a portion of which may have been implemented prior to the date hereof, including the completion of the Internal Restructuring.

2.2             Internal Restructuring; Transfer of Assets and Assumption of Liabilities .

(a)            Internal Restructuring . At or prior to the Effective Time, the Parties shall complete the Internal Restructuring, except for such steps (if any) as KAR in its sole discretion shall have determined need not be completed or may be completed after the Effective Time.

(b)            Transfer of Assets and Assumption of Liabilities . At or prior to the Effective Time, pursuant to the Transfer Documents and in connection with the SpinCo Contribution:

(i)            Transfer and Assignment of SpinCo Assets . KAR shall, or shall cause the applicable members of the KAR Group to, contribute, assign, transfer, convey and deliver to SpinCo, or the applicable SpinCo Designees, and SpinCo or such SpinCo Designees shall accept from KAR or the applicable members of the KAR Group, all of KAR’s or such KAR Group members’ respective direct or indirect right, title and interest in and to all of the SpinCo Assets held by KAR or such KAR Group members, including, for the avoidance of doubt, all of the outstanding shares of capital stock or other ownership interest in the Transferred Entities (it being understood that if any SpinCo Asset shall be held by a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such SpinCo Asset shall be deemed assigned, transferred, conveyed and delivered to SpinCo as a result of the transfer of all of the equity interests in such Transferred Entity from KAR or the applicable members of the KAR Group to SpinCo or the applicable SpinCo Designee);

(ii)            Acceptance and Assumption of SpinCo Liabilities . SpinCo and the applicable SpinCo Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all of the SpinCo Liabilities in accordance with their respective terms. SpinCo and such SpinCo Designees shall be responsible for all of the SpinCo Liabilities, regardless of when or where such SpinCo Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such SpinCo Liabilities are asserted or determined (including any SpinCo Liabilities arising out of claims made by SpinCo’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the KAR Group or the SpinCo Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the KAR Group or the SpinCo Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates (it being understood that if any SpinCo Liability shall be a Liability of a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such SpinCo Liability shall become liabilities of the applicable member of the SpinCo Group as a result of the transfer of all of the equity interests in such Transferred Entity from KAR or the applicable members of the KAR Group to SpinCo or the applicable SpinCo Designee);
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(iii)            Transfer and Assignment of KAR Assets . KAR and SpinCo shall cause SpinCo and/or the applicable SpinCo Designees to contribute, assign, transfer, convey and deliver to KAR and/or one or more members of the KAR Group designated by KAR, and KAR or such other members of the KAR Group shall accept from SpinCo and the SpinCo Designees, all of SpinCo’s and such SpinCo Designees’ respective direct or indirect right, title and interest in and to all KAR Assets held by SpinCo or such SpinCo Designees; and

(iv)            Acceptance and Assumption of KAR Liabilities . KAR and one or more members of the KAR Group designated by KAR shall accept and assume and agree faithfully to perform, discharge and fulfill all of the KAR Liabilities in accordance with their respective terms.  KAR and the applicable members of the KAR Group shall be responsible for all KAR Liabilities, regardless of when or where such KAR Liabilities arose or arise, whether the facts on which they are based occurred prior to or subsequent to the Effective Time, where or against whom such KAR Liabilities are asserted or determined (including any such KAR Liabilities arising out of claims made by KAR’s or SpinCo’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the KAR Group or the SpinCo Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the KAR Group or the SpinCo Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates.

(c)            Transfer Documents . In furtherance of the contribution, assignment, transfer, conveyance and delivery of the Assets and the assumption of the Liabilities in accordance with Section 2.2(b) , each Party shall execute and deliver, and shall cause the applicable members of such Party’s Group to execute and deliver, (i) such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of such Party’s and the applicable members of such Party’s Group’s right, title and interest in and to such Assets to the other Party and/or the applicable members of its Group in accordance with Section 2.2(b) , and (ii) such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Liabilities by such Party and/or the applicable members of its Group in accordance with Section 2.2(b) . All of the foregoing documents contemplated by this Section 2.2(c) shall be referred to collectively herein as the “ Transfer Documents .”
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(d)            Misallocations . In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party (or any member of such Party’s Group) shall receive or otherwise possess any Asset that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Asset to the Party so entitled thereto (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept such Asset. Prior to any such transfer, the Person receiving or possessing such Asset shall hold such Asset in trust for any such other Person. In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party hereto (or any member of such Party’s Group) shall receive or otherwise assume any Liability that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Liability to the Party responsible therefor (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept, assume and agree to faithfully perform such Liability.

(e)            Waiver of Bulk-Sale and Bulk-Transfer Laws . SpinCo hereby waives compliance by each and every member of the KAR Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the SpinCo Assets to any member of the SpinCo Group. KAR hereby waives compliance by each and every member of the SpinCo Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the KAR Assets to any member of the KAR Group.

2.3 SpinCo Assets; KAR Assets

(a)            SpinCo Assets . Except as otherwise provided in the Tax Matters Agreement, for purposes of this Agreement, “ SpinCo Assets ” shall mean, as of the date of determination, all Assets of either Party or the members of such Party’s Group that relate primarily to the SpinCo Business, including without limitation:

(i)            all issued and outstanding capital stock or other equity interests of the Transferred Entities that are owned by either Party or any members of such Party’s Group;

(ii)            all Assets of either Party or any of the members of such Party’s Group included or reflected as assets of the SpinCo Group on the SpinCo Balance Sheet, subject to any dispositions of such Assets subsequent to the date of the SpinCo Balance Sheet; provided , however , that the amounts set forth on the SpinCo Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of SpinCo Assets pursuant to this subclause (ii);
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(iii)            all Assets of either Party or any of the members of such Party’s Group that are of a nature or type that would have resulted in such Assets being included as Assets of SpinCo or members of the SpinCo Group on a pro forma combined balance sheet of the SpinCo Group or any notes thereto (were such balance sheet and notes to be prepared on a basis consistent with the determination of the Assets included on the SpinCo Balance Sheet), it being understood that (x) the SpinCo Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Assets that are included in the definition of SpinCo Assets pursuant to this subclause (iii); and (y) the amounts set forth on the SpinCo Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of SpinCo Assets pursuant to this subclause (iii);

(iv)            all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be transferred to SpinCo or any other member of the SpinCo Group;

(v)            all SpinCo Real Property and all rights, interests or claims of either Party or any of the members of such Party’s Group thereunder;

(vi)            all office equipment, trade fixtures and furnishings located at (x) SpinCo Real Property, but excluding the items listed on Schedule 2.3(a)(vi) , and (y) Owned Real Property or Leased Real Property (other than the SpinCo Real Property) and listed on Schedule 2.3(a)(vi) (in each case excluding any office equipment, trade fixtures and furnishings owned by Persons other than KAR and its subsidiaries) (the “ SpinCo FF&E ”);

(vii)            all SpinCo Contracts and all rights, interests or claims of either Party or any of the members of such Party’s Group thereunder;

(viii)            the rights and benefits under the Shared Contracts to the extent allocated or assigned to any member of the SpinCo Group pursuant to Section 2.9 (including pursuant to any pass-through or alternative arrangement entered into by the Parties thereunder); and

(ix)            all SpinCo Intellectual Property, SpinCo Software and SpinCo Technology and all rights, interests or claims of either Party or any of the members of such Party’s Group thereunder;

(x)            all SpinCo Permits, and all rights, interests or claims of either Party or any of the members of such Party’s Group thereunder;

(xi)            subject to Article VI and the provisions of the applicable Ancillary Agreements, all rights, interests and claims of either Party or any of the members of such Party’s Group with respect to Information that is primarily related to the SpinCo Assets, the SpinCo Liabilities, the SpinCo Business or the Transferred Entities;
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(xii)            all Assets set forth on Schedule 2.3(a)(xii) ; and

(xiii)            all other Assets of either Party or any of the members of such Party’s Group that are primarily related to the SpinCo Business.

Notwithstanding the foregoing, the SpinCo Assets shall not in any event include any KAR Asset.

(b)            KAR Assets . Except as otherwise provided in the Tax Matters Agreement, for purposes of this Agreement, “ KAR Assets ” shall mean, as of the date of determination, all Assets of either Party or the members of such Party’s Group, other than the SpinCo Assets, it being understood that the KAR Assets shall include:

(i)            all issued and outstanding capital stock or other equity interests of KAR’s Subsidiaries other than the Transferred Entities;

(ii)            all office equipment, trade fixtures and furnishings located at any Owned Real Property or Leased Real Property (other than SpinCo FF&E or any office equipment, trade fixtures or furnishings owned by Persons other than KAR and its Subsidiaries);

(iii)            all Owned Real Property and Leased Real Property (other than the SpinCo Real Property);

(iv)            all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by KAR or any other member of the KAR Group;

(v)            all contracts of either Party or any of the members of such Party’s Group (other than the SpinCo Contracts);

(vi)            the rights and benefits under the Shared Contracts to the extent not allocated or assigned to any member of the SpinCo Group pursuant to Section 2.9 (including pursuant to any pass-through or alternative arrangement entered into by the Parties thereunder);

(vii)            all Intellectual Property of either Party or any of the members of such Party’s Group (other than the SpinCo Intellectual Property), including the KAR Marks and the Intellectual Property set forth on Schedule 2.3(b)(vii) ;

(viii)            all Permits of either Party or any of the members of such Party’s Group (other than the SpinCo Permits);

(ix)            all rights, interests and claims of either Party or any of the members of such Party’s Group with respect to Information that does not relate primarily to the SpinCo Assets, the SpinCo Liabilities, the SpinCo Business or the Transferred Entities;

(x)            all Assets set forth on Schedule 2.3(b)(x) ; and
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(xi)            all other Assets of either Party or any of the members of such Party’s Group that relate primarily to the KAR Business.

Notwithstanding the foregoing, the KAR Assets shall not in any event include any SpinCo Asset.

2.4     SpinCo Liabilities; KAR Liabilities.

(a)            SpinCo Liabilities . For purposes of this Agreement, “ SpinCo Liabilities ” shall mean, as of the date of determination, all Liabilities of either Party or any of the members of such Party’s Group that relate primarily to the SpinCo Business, including without limitation:

(i)            all Liabilities included or reflected as liabilities or obligations of SpinCo or the members of the SpinCo Group on the SpinCo Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the SpinCo Balance Sheet; provided , however , that the amounts set forth on the SpinCo Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of SpinCo Liabilities pursuant to this subclause (i);

(ii)            all Liabilities that are of a nature or type that would have resulted in such Liabilities being included or reflected as liabilities or obligations of SpinCo or the members of the SpinCo Group on a pro forma combined balance sheet of the SpinCo Group or any notes thereto (were such balance sheet and notes to be prepared on a basis consistent with the determination of the Liabilities included on the SpinCo Balance Sheet ), it being understood that (x) the SpinCo Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of SpinCo Liabilities pursuant to this subclause (ii); and (y) the amounts set forth on the SpinCo Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of SpinCo Liabilities pursuant to this subclause (ii);

(iii)            all Liabilities, including any Environmental Liabilities, relating to, arising out of or resulting from the actions, inactions, events, conduct, omissions, conditions, occurrences, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent that such Liabilities relate to, arise out of or result from the SpinCo Business or any SpinCo Asset;

(iv)            all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by SpinCo or any other member of the SpinCo Group, and all agreements, obligations and Liabilities of any member of the SpinCo Group under this Agreement or any of the Ancillary Agreements;
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(v)            all Liabilities relating to, arising out of or resulting from the SpinCo Contracts, the SpinCo Intellectual Property, the SpinCo Software, the SpinCo Technology, the SpinCo Permits or the SpinCo Credit Facility;

(vi)            all Liabilities set forth on Schedule 2.4(a)(vi) ;

(vii)            all Liabilities arising out of claims made by any Third Party (including KAR’s or SpinCo’s respective directors, officers, stockholders, employees and agents) against any member of the KAR Group or the SpinCo Group to the extent relating to, arising out of or resulting from the SpinCo Business or the SpinCo Assets or the other business, operations, activities or Liabilities referred to in subclauses (i) through (vi) above; and

(viii)            all other Liabilities of either Party or any of the members of such Party’s Group that relate primarily to the SpinCo Business.

(b)            KAR Liabilities . For purposes of this Agreement, “ KAR Liabilities ” shall mean, as of the date of determination, (i) all Liabilities relating to, arising out of or resulting from actions, inactions, events, conduct, omissions, conditions, occurrences, facts or circumstances occurring or existing as of the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), of any member of the KAR Group and any member of the SpinCo Group, in each case that are not SpinCo Liabilities, including any and all Liabilities set forth on Schedule 2.4(b) and (iii) all Liabilities arising out of claims made by any Third Party (including KAR’s or SpinCo’s respective directors, officers, stockholders, employees and agents) against any member of the KAR Group or the SpinCo Group to the extent relating to, arising out of or resulting from the KAR Business or the KAR Assets.

      2.5     Approvals and Notifications

(a)            Approvals and Notifications for SpinCo Assets . The Parties shall use their respective commercially reasonable efforts to obtain or make all Approvals or Notifications required to implement the transfer of SpinCo Assets to the SpinCo Group as set forth in Section 2.2(b)(i) as soon as reasonably practicable; provided , however , that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between KAR and SpinCo, neither KAR nor SpinCo shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make any such Approvals or Notifications.

(b)            Delayed SpinCo Transfers . If and to the extent that the valid, complete and perfected transfer or assignment to the SpinCo Group of any SpinCo Asset or assumption by the SpinCo Group of any SpinCo Liability would be a violation of applicable Law or require any Approvals or Notifications in connection with the Separation or the Distribution that have not been obtained or made by the Effective Time, then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the SpinCo Group of such SpinCo Assets or the assumption by the SpinCo Group of such SpinCo Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made. Notwithstanding the foregoing, any such SpinCo Assets or SpinCo Liabilities shall continue to constitute SpinCo Assets and SpinCo Liabilities for all other purposes of this Agreement.
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(c)            Treatment of Delayed SpinCo Assets and Delayed SpinCo Liabilities . If any transfer or assignment of any SpinCo Asset or any assumption of any SpinCo Liability intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Effective Time, whether as a result of the provisions of Section 2.5(b) or for any other reason (any such SpinCo Asset, a “ Delayed SpinCo Asset ” and any such SpinCo Liability, a “ Delayed SpinCo Liability ”), then, insofar as reasonably practicable and subject to applicable Law, the member of the KAR Group retaining such Delayed SpinCo Asset or such Delayed SpinCo Liability, as the case may be, shall thereafter hold such Delayed SpinCo Asset or Delayed SpinCo Liability, as the case may be, for the use and benefit of the member of the SpinCo Group entitled thereto (at the expense of the member of the SpinCo Group entitled thereto). In addition, the member of the KAR Group retaining such Delayed SpinCo Asset or such Delayed SpinCo Liability shall, insofar as reasonably practicable and to the extent permitted by applicable Law, treat such Delayed SpinCo Asset or Delayed SpinCo Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the SpinCo Group to whom such Delayed SpinCo Asset is to be transferred or assigned, or which will assume such Delayed SpinCo Liability, as the case may be, in order to place such member of the SpinCo Group in a substantially similar position as if such Delayed SpinCo Asset or Delayed SpinCo Liability had been transferred, assigned or assumed as contemplated hereby and so that all the benefits and burdens relating to such Delayed SpinCo Asset or Delayed SpinCo Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Delayed SpinCo Asset or Delayed SpinCo Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time, to the SpinCo Group.

(d)            Transfer of Delayed SpinCo Assets and Delayed SpinCo Liabilities . If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed SpinCo Asset or the deferral of assumption of any Delayed SpinCo Liability pursuant to Section 2.5(b) , are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed SpinCo Asset or the assumption of any Delayed SpinCo Liability have been removed, the transfer or assignment of the applicable Delayed SpinCo Asset or the assumption of the applicable Delayed SpinCo Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(e)            Costs for Delayed SpinCo Assets and Delayed SpinCo Liabilities . Any member of the KAR Group retaining a Delayed SpinCo Asset or Delayed SpinCo Liability due to the deferral of the transfer or assignment of such Delayed SpinCo Asset or the deferral of the assumption of such Delayed SpinCo Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by SpinCo or the member of the SpinCo Group entitled to the Delayed SpinCo Asset or Delayed SpinCo Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by SpinCo or the member of the SpinCo Group entitled to such Delayed SpinCo Asset or Delayed SpinCo Liability.
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(f)            Approvals and Notifications for KAR Assets . The Parties shall use their commercially reasonable efforts to obtain or make all Approvals or Notifications required to implement the transfer of KAR Assets to the KAR Group as set forth in Section 2.2(b)(iii) as soon as reasonably practicable; provided , however , that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between KAR and SpinCo, neither KAR nor SpinCo shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make any such Approvals or Notifications.

(g)            Delayed KAR Transfers . If and to the extent that the valid, complete and perfected transfer or assignment to the KAR Group of any KAR Asset or assumption by the KAR Group of any KAR Liability would be a violation of applicable Law or require any Approval or Notification that has not been obtained or made by the Effective Time, then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the KAR Group of such KAR Assets or the assumption by the KAR Group of such KAR Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approval or Notification has been obtained or made. Notwithstanding the foregoing, any such KAR Assets or KAR Liabilities shall continue to constitute KAR Assets and KAR Liabilities for all other purposes of this Agreement.

(h)            Treatment of Delayed KAR Assets and Delayed KAR Liabilities . If any transfer or assignment of any KAR Asset or any assumption of any KAR Liability intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Effective Time, whether as a result of the provisions of this Section 2.5(h) or for any other reason (any such KAR Asset, a “ Delayed KAR Asset ” and any such KAR Liability, a “ Delayed KAR Liability ”), then, insofar as reasonably practicable, the member of the SpinCo Group retaining such Delayed KAR Asset or such Delayed KAR Liability, as the case may be, shall thereafter hold such Delayed KAR Asset or Delayed KAR Liability, as the case may be, for the use and benefit of the member of the KAR Group entitled thereto (at the expense of the member of the KAR Group entitled thereto). In addition, the member of the SpinCo Group retaining such Delayed KAR Asset or such Delayed KAR Liability shall, insofar as reasonably practicable and to the extent permitted by applicable Law, treat such Delayed KAR Asset or Delayed KAR Liability in the ordinary course of business in accordance with past practice. Such member of the SpinCo Group shall also take such other actions as may be reasonably requested by the member of the KAR Group to which such Delayed KAR Asset is to be transferred or assigned, or which will assume such Delayed KAR Liability, as the case may be, in order to place such member of the KAR Group in a substantially similar position as if such Delayed KAR Asset or Delayed KAR Liability had been transferred, assigned or assumed and so that all the benefits and burdens relating to such Delayed KAR Asset or Delayed KAR Liability, and all costs and expenses related thereto, shall inure from and after the Effective Time to the KAR Group.
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(i)            Transfer of Delayed KAR Assets and Delayed KAR Liabilities . If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed KAR Asset or the deferral of assumption of any Delayed KAR Liability, are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed KAR Asset or the assumption of any Delayed KAR Liability have been removed, the transfer or assignment of the applicable Delayed KAR Asset or the assumption of the applicable Delayed KAR Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(j)            Costs for Delayed KAR Assets and Delayed KAR Liabilities . Any member of the SpinCo Group retaining an Delayed KAR Asset or Delayed KAR Liability due to the deferral of the transfer or assignment of such Delayed KAR Asset or the deferral of the assumption of such Delayed KAR Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by KAR or the member of the KAR Group entitled to the Delayed KAR Asset or Delayed KAR Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by KAR or the member of the KAR Group entitled to such Delayed KAR Asset or Delayed KAR Liability.

2.6   Novation of Liabilities.

(a)            Novation of SpinCo Liabilities .

(i)            Each of KAR and SpinCo, at the request of the other, shall use its respective commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all SpinCo Liabilities and obtain in writing the unconditional release of each member of the KAR Group that is a party to any such arrangements, so that, in any such case, the members of the SpinCo Group shall be solely responsible for such SpinCo Liabilities; provided , however , that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither KAR nor SpinCo shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Third Party from whom any such consent, substitution, approval, amendment or release is requested.

(ii)            If KAR or SpinCo is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the KAR Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “ Unreleased SpinCo Liability ”), SpinCo shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the KAR Group, as the case may be, (A) pay, perform and discharge fully all the obligations or other Liabilities of such member of the KAR Group that constitute Unreleased KAR Liabilities from and after the Effective Time and (B) use its commercially reasonable efforts to effect such payment, performance or discharge prior to any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the KAR Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased SpinCo Liabilities shall otherwise become assignable or able to be novated, KAR shall promptly assign, or cause to be assigned, and SpinCo or the applicable SpinCo Group member shall assume, such Unreleased SpinCo Liabilities without exchange of further consideration.
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(b)            Novation of KAR Liabilities .

(i)            Each of KAR and SpinCo, at the request of the other, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all KAR Liabilities and obtain in writing the unconditional release of each member of the SpinCo Group that is a party to any such arrangements, so that, in any such case, the members of the KAR Group shall be solely responsible for such KAR Liabilities; provided , however , that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither KAR nor SpinCo shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Third Party from whom any such consent, substitution, approval, amendment or release is requested.

(ii)            If KAR or SpinCo is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the SpinCo Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “ Unreleased KAR Liability ”), KAR shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the SpinCo Group, as the case may be, (A) pay, perform and discharge fully all the obligations or other Liabilities of such member of the SpinCo Group that constitute Unreleased KAR Liabilities from and after the Effective Time and (B) use its commercially reasonable efforts to effect such payment, performance or discharge prior to any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the SpinCo Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased KAR Liabilities shall otherwise become assignable or able to be novated, SpinCo shall promptly assign, or cause to be assigned, and KAR or the applicable KAR Group member shall assume, such Unreleased KAR Liabilities without exchange of further consideration.

        2.7     Release of Guarantees In furtherance of, and not in limitation of, the obligations set forth in Section 2.6 :

(a)            On or prior to the Effective Time or as soon as practicable thereafter, each of KAR and SpinCo shall, at the request of the other Party and with the reasonable cooperation of such other Party and the applicable member(s) of such Party’s Group, use commercially reasonable efforts to (i) have any member(s) of the KAR Group removed as guarantor of or obligor for any SpinCo Liability to the extent that they relate to SpinCo Liabilities, including the removal of any Security Interest on or in any KAR Asset that may serve as collateral or security for any such SpinCo Liability; and (ii) have any member(s) of the SpinCo Group removed as guarantor of or obligor for any KAR Liability to the extent that they relate to KAR Liabilities, including the removal of any Security Interest on or in any SpinCo Asset that may serve as collateral or security for any such KAR Liability.
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(b)            To the extent required to obtain a release from a guarantee of:

(i)            any member of the KAR Group, SpinCo shall execute a guarantee agreement in the form of the existing guarantee or such other form as is agreed to by the relevant parties to such guarantee agreement, which agreement shall include the removal of any Security Interest on or in any KAR Asset that may serve as collateral or security for any such KAR Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (A) with which SpinCo would be reasonably unable to comply or (B) which SpinCo would not reasonably be able to avoid breaching; and

(ii)            any member of the SpinCo Group, KAR shall execute a guarantee agreement in the form of the existing guarantee or such other form as is agreed to by the relevant parties to such guarantee agreement, which agreement shall include the removal of any Security Interest on or in any SpinCo Asset that may serve as collateral or security for any such SpinCo Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (A) with which KAR would be reasonably unable to comply or (B) which KAR would not reasonably be able to avoid breaching.

(c)            If KAR or SpinCo is unable to obtain, or to cause to be obtained, any such required removal or release as set forth in subclauses (a) and (b) of this Section 2.7 , (i) the Party or the relevant member of such Party’s Group that has assumed the Liability with respect to such guarantee shall indemnify, defend and hold harmless the guarantor or obligor against or from any Liability arising from or relating thereto in accordance with the provisions of Article IV and shall, as agent or subcontractor for such guarantor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder; and (ii) each of KAR and SpinCo, on behalf of itself and the other members of their respective Group, agree not to renew or extend the term of, increase any obligations under, or transfer to a Third Party, any loan, guarantee, lease, contract or other obligation for which the other Party or a member of such Party’s Group is or may be liable unless all obligations of such other Party and the members of such other Party’s Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to such other Party.

        2.8     Termination of Agreements

(a)            Except as set forth in Section 2.8(b) , in furtherance of the releases and other provisions of Section 4.1 , SpinCo and each member of the SpinCo Group, on the one hand, and KAR and each member of the KAR Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between SpinCo and/or any member of the SpinCo Group, on the one hand, and KAR and/or any member of the KAR Group, on the other hand, effective as of the Effective Time. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.
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(b)            The provisions of Section 2.8(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the Parties or any of the members of their respective Groups or to be continued from and after the Effective Time); (ii) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.8(b)(ii) ; (iii) any agreements, arrangements, commitments or understandings to which any Third Party is also a party thereto; (iv) any intercompany accounts payable or accounts receivable accrued as of the Effective Time that are reflected in the books and records of the Parties or otherwise documented in writing in accordance with past practices, which shall be settled in the manner contemplated by Section 2.8(c) ; (v) any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary of KAR or SpinCo, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned); and (vi) any Shared Contracts.

(c)            All of the intercompany accounts receivable and accounts payable between any member of the KAR Group, on the one hand, and any member of the SpinCo Group, on the other hand, outstanding as of the Effective Time shall, as promptly as practicable after the Effective Time, be repaid, settled or otherwise eliminated by means of cash payments, a dividend, capital contribution, a combination of the foregoing, or otherwise as determined by KAR in its sole and absolute discretion.

        2.9     Treatment of Shared Contracts .

(a)            Subject to applicable Law and without limiting the generality of the obligations set forth in Section 2.1 , unless the Parties otherwise agree or the benefits of any contract, agreement, arrangement, commitment or understanding described in this Section 2.9   are expressly conveyed to the applicable Party pursuant to this Agreement or an Ancillary Agreement, any contract or agreement, a portion of which is a SpinCo Contract, but the remainder of which is a KAR Asset (any such contract or agreement, a “ Shared Contract ”), shall as of the Effective Time be retained by or assigned to, as applicable, KAR or another member of the KAR Group, as determined in KAR’s sole discretion, and the Parties shall agree to mutually satisfactory allocation of the rights, benefits and Liabilities under such Shared Contracts under the Transition Services Agreement or another agreement or arrangement, as applicable; provided , however , that (i) in no event shall any member of either Group be required to assign (or amend) any Shared Contract that is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment where such consents or conditions have not been obtained or fulfilled) and (ii) if any Shared Contract cannot be so assigned by its terms or otherwise, or cannot be amended or if such assignment or amendment would impair the benefit the parties thereto derive from such Shared Contract, then the Parties shall, and shall cause each of the members of their respective Groups to, take such other reasonable and permissible actions (including by providing prompt notice to the other Party with respect to any relevant claim of Liability or other relevant matters arising in connection with a Shared Contract so as to allow such other Party the ability to exercise any applicable rights under such Shared Contract) to cause a member of the KAR Group to receive the rights and benefits of each Shared Contract, as if such Shared Contract had been assigned to (or amended to allow) a member of the KAR Group pursuant to this Section 2.9 , and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement), as if such Liabilities had been assumed by a member of the KAR Group pursuant to this Section 2.9 .
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(b)            Notwithstanding the foregoing, each of the Shared Contracts set forth on Schedule 2.9(b) shall be assigned in whole or in part to SpinCo.

(c)            Each of KAR and SpinCo shall, and shall cause the members of each such Party’s Group to, (i) treat for all Tax purposes the portion of each Shared Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such Party, or the members of such Party’s Group, as applicable, not later than the Effective Time, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).

(d)            Nothing in this Section 2.9 shall require any member of either Group to make any non- de minimis payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by any member of the other Group), incur any non- de minimis obligation or grant any non- de minimis concession for the benefit of any member of the other Group in order to effect any transaction contemplated by this Section 2.9 .

        2.10     Bank Accounts; Cash Balances

(a)            Each Party agrees to take, or cause the members of such Party’s Group to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by SpinCo or any other member of the SpinCo Group (collectively, the “ SpinCo Accounts ”) and all contracts or agreements governing each bank or brokerage account owned by KAR or any other member of the KAR Group (collectively, the “ KAR Accounts ”) so that each such SpinCo Account and KAR Account, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “ Linked ”) to any KAR Account or SpinCo Account, respectively, is no longer Linked to such KAR Account or SpinCo Account, respectively.

(b)            With respect to any outstanding checks or drafts issued or wire transfers or other payments initiated by KAR, SpinCo, or any of the members of their respective Groups prior to the Effective Time, such outstanding checks, drafts, wire transfers and other payments shall be honored following the Effective Time by the Person or Group owning the account on which the check or draft is drawn or from which the wire transfer or other payment was initiated, respectively.
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(c)            As between KAR and SpinCo (and the members of their respective Groups), all payments made and reimbursements received after the Effective Time by either Party (or member of such Party’s Group) that relate to a business, Asset or Liability of the other Party (or member of such Party’s Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto and, promptly following receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of such Party’s Group to pay over to the other Party the amount of such payment or reimbursement without right of set-off.

2.11     Ancillary Agreements . Effective on or prior to the Effective Time, each of KAR and SpinCo will, or will cause the applicable members of such Party’s Group to, execute and deliver all Ancillary Agreements to which it is a party.

2.12         Disclaimer of Representations and Warranties  . EACH OF KAR (ON BEHALF OF ITSELF AND EACH MEMBER OF THE KAR GROUP) AND SPINCO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE SPINCO GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER OR THEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM OF DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.
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        2.13   Financing Arrangements

(a)            Prior to or at the Effective Time, SpinCo shall enter into the SpinCo Credit Facility and issue the SpinCo Notes.  SpinCo shall borrow a principal amount of $800.0 million Dollars under the SpinCo Credit Facility and issue SpinCo Notes in an aggregate principal amount of $500.0 million Dollars and, subject to the availability of sufficient surplus and satisfaction of all other requirements under Delaware law, prior to the Effective Time, SpinCo shall use a portion of the proceeds from the SpinCo Credit Facility and the SpinCo Notes to make the Cash Distribution.  Each of KAR and SpinCo shall cooperate in the preparation of all materials as may be necessary or advisable to effect the SpinCo Credit Facility and the SpinCo Notes.

(b)            Upon receipt by KAR of the Cash Distribution, KAR shall separately trace the proceeds of the Cash Distribution and shall use all of the proceeds of the Cash Distribution to repay one billion and two hundred and seventy-seven million nine hundred and sixty-four thousand and fifty-four Dollars ($1, 277,964,054 ) of the outstanding indebtedness under the Existing KAR Credit Facility.

(c)            The Parties agree that SpinCo or another member of the SpinCo Group, as the case may be, shall be responsible for all costs and expenses associated with the SpinCo Credit Facility.

(d)            The Parties agree to take all necessary actions to assure the (i) full release and discharge of SpinCo and the other members of the SpinCo Group from any and all obligations pursuant to the Existing KAR Credit Facility and the release of all liens and encumbrances against the Assets of SpinCo and the other members of the SpinCo Group previously securing such Existing KAR Credit Facility and (ii) full release and discharge of KAR and the other members of the KAR Group from any and all obligations pursuant to the SpinCo Credit Facility and the release of all liens and encumbrances against the Assets of KAR and the other members of the KAR Group previously securing such SpinCo Credit Facility, if applicable.

        2.15   Solvency and Liquidity .  Prior to the Distribution, the Parties shall take all actions as KAR may determine to be reasonably necessary and desirable to provide for the liquidity and solvency of the KAR Group and the SpinCo Group as of immediately after the Distribution, including, without limitation, the transfer of sufficient cash, cash equivalents or other Assets to enable SpinCo and the SpinCo Group to be reasonably capitalized for the operation of their respective businesses and to pay their respective liabilities, including contingent and other liabilities, as they mature.

        2.16   SpinCo Contribution . In connection with the Separation and in exchange for the SpinCo Contribution, SpinCo shall (i) issue to KAR additional SpinCo Shares such that the number of SpinCo Shares outstanding after such issuance shall be equal to the number of SpinCo Shares necessary to effect the Distribution and (ii) make the Cash Distribution.


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ARTICLE III

THE DISTRIBUTION

        3.1     Sole and Absolute Discretion; Cooperation

(a)            KAR shall, in its sole and absolute discretion, determine the terms of the Distribution, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution. In addition, KAR may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. Nothing shall in any way limit KAR’s right to terminate this Agreement or the Distribution as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX .

(b)            SpinCo shall cooperate with KAR to accomplish the Distribution and shall, at KAR’s direction, promptly take any and all actions that KAR or SpinCo determines to be necessary or desirable to effect the Distribution, including in respect of the registration under the Exchange Act of SpinCo Shares on the Form 10. KAR shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation and/or distribution agent and financial, legal, accounting and other advisors for KAR. SpinCo and KAR, as the case may be, will provide to the Agent any information required in order to complete the Distribution.

        3.2     Actions Prior to the Distribution . Prior to the Effective Time and subject to the terms and conditions set forth herein, the Parties shall take, or cause to be taken, the following actions in connection with the Distribution:

(a)            Notice to NYSE . KAR shall, to the extent practicable, give the NYSE not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

(b)            SpinCo Certificate of Incorporation and SpinCo Bylaws . On or prior to the Distribution Date, KAR and SpinCo shall take all necessary actions so that, as of the Effective Time, the SpinCo Certificate of Incorporation and the SpinCo Bylaws shall become the certificate of incorporation and bylaws, respectively, of SpinCo.

(c)            SpinCo Directors and Officers . On or prior to the Distribution Date, KAR and SpinCo shall take all necessary actions so that as of the Effective Time: (i) the directors and executive officers of SpinCo shall be those set forth in the Information Statement, unless otherwise agreed by the Parties; (ii) except those individuals who will continue to serve as members of the KAR Board after the Effective Time, as set forth in the Information Statement, each individual referred to in clause (i) shall have resigned from his or her position, if any, as a member of the KAR Board, as an executive officer of KAR and as a member of the board of directors or other governing body or as an executive officer of any other member of the KAR Group, as applicable; and (iii) SpinCo shall have such other officers as SpinCo shall appoint.
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(d)            NYSE Listing . SpinCo shall prepare and file, and shall use its reasonable best efforts to have approved, an application for the listing of the SpinCo Shares to be distributed in the Distribution on the NYSE.

(e)            Securities Law Matters . SpinCo shall file any amendments or supplements to the Form 10 as may be necessary or advisable in order to cause the Form 10 to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. KAR and SpinCo shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or advisable in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. KAR and SpinCo shall prepare, and SpinCo shall, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters which KAR determines are necessary or desirable to effectuate the Distribution, and KAR and SpinCo shall each use its reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable. KAR and SpinCo shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

(f)            Mailing of Information Statement . KAR shall, as soon as is reasonably practicable after the Form 10 is declared effective under the Exchange Act and the KAR Board has approved the Distribution, cause the Information Statement, or a notice of internet availability of the Information Statement, to be mailed to the Record Holders.

(g)            The Distribution Agent . KAR shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

3.3     Conditions to the Distribution.

(a)            The consummation of the Distribution shall be subject to the satisfaction, or, to the extent permitted by applicable Law, waiver by KAR in its sole and absolute discretion, of the following conditions:

(i)            The SEC shall have declared effective the Form 10, no order suspending the effectiveness of the Form 10 shall be in effect, and no proceedings for such purposes shall have been instituted or threatened by the SEC.

(ii)            The Information Statement, or a notice of internet availability of the Information Statement, shall have been mailed to Record Holders.

(iii)            KAR shall have received an opinion from its outside counsel to the effect that the Separation and the Distribution, taken together, will qualify as a transaction that is described in Sections 368(a)(1)(D) and 355 of the Code.
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(iv)            The KAR Board shall have obtained an opinion from a nationally recognized appraisal, valuation and investment banking firm, in form and substance satisfactory to the KAR Board, substantially to the effect that, immediately after and giving effect to the Separation and Distribution and on a pro forma basis: (a) each of the fair value and present fair saleable value of the assets of KAR and SpinCo on a consolidated basis would exceed the stated liabilities and identified contingent liabilities of KAR and SpinCo, respectively, on a consolidated basis; (b) each of KAR and SpinCo should be able to pay its debts as they become absolute and mature; and (c) each of KAR and SpinCo should not have unreasonably small capital for the business in which each such entity is engaged.

(v)            The Internal Restructuring shall have been effectuated, except for such steps (if any) as KAR in its sole discretion shall have determined need not be completed or may be completed after the Distribution Date.

(vi)            The Separation (other than the transfer of Delayed KAR Assets, Delayed KAR Liabilities, Delayed SpinCo Assets and Delayed SpinCo Liabilities, if any) shall have been effectuated as contemplated by Section 2.2(b) .

(vii)            The actions and filings necessary or appropriate under applicable U.S. federal, U.S. state and other securities Laws or blue sky Laws and the rules and regulations thereunder shall have been taken or made, and, where applicable, have become effective or been accepted.

(viii)            Each of the Ancillary Agreements shall have been duly executed and delivered by the applicable parties thereto.

(ix)            No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation, the Distribution or any of the transactions related thereto shall be threatened or in effect.

(x)            The SpinCo Shares to be distributed to the KAR stockholders in the Distribution shall have been accepted for listing on the NYSE, subject to official notice of distribution.

(xi)            KAR shall have received the SpinCo Shares and the Cash Distribution, and shall be satisfied in its sole and absolute discretion that, as of the Effective Time, it shall have no further liability under the SpinCo Credit Facility.

(xii)            No other events or developments shall exist or shall have occurred that, in the judgment of the KAR Board, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution or the transactions contemplated by this Agreement or any Ancillary Agreement.

(b)            The foregoing conditions are for the sole benefit of KAR and shall not give rise to or create any duty on the part of KAR or the KAR Board to waive or not waive any such condition or in any way limit KAR’s right to terminate this Agreement as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX . Any determination made by the KAR Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 3.3(a) shall be conclusive and binding on the Parties. If KAR waives any material condition, it shall promptly issue a press release disclosing such fact and file a Current Report on Form 8-K with the SEC describing such waiver.
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3.4     The Distribution.

(a)            Subject to Section 3.3 , on or prior to the Effective Time, SpinCo will deliver to the Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of SpinCo Shares as is necessary to effect the Distribution, and shall cause the transfer agent for the KAR Shares to instruct the Agent to distribute at the Effective Time the appropriate number of SpinCo Shares to each such holder or designated transferee or transferees of such holder by way of direct registration in book-entry form. SpinCo will not issue paper stock certificates in respect of the SpinCo Shares. The Distribution shall be effective at the Effective Time.

(b)            Subject to Section 3.3 , each Record Holder will be entitled to receive in the Distribution one (1) SpinCo Share for every KAR Share held by such Record Holder on the Record Date.

(c)            No fractional shares shall be distributed or credited to book-entry accounts in connection with the Distribution, and any such fractional share interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a stockholder of SpinCo. In lieu of any such fractional shares, each Record Holder who, but for the provisions of this Section 3.4(c) , would be entitled to receive a fractional share interest of a SpinCo Share pursuant to the Distribution, shall be paid cash, without any interest thereon, as hereinafter provided. As soon as practicable after the Effective Time, KAR shall direct the Agent to determine the number of whole and fractional SpinCo Shares allocable to each Record Holder, to aggregate all such fractional shares into whole shares, and to sell the whole shares obtained thereby in the open market at the then-prevailing prices on behalf of each Record Holder who otherwise would be entitled to receive fractional share interests (with the Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and to cause to be distributed to each such Record Holder, in lieu of any fractional share, such Record Holder’s or owner’s ratable share of the total proceeds of such sale, after deducting any Taxes required to be withheld and applicable transfer Taxes, and after deducting the costs and expenses of such sale and distribution, including brokers fees and commissions. None of KAR, SpinCo or the Agent shall be required to guarantee any minimum sale price for the fractional SpinCo Shares sold in accordance with this Section 3.4(c) . Neither KAR nor SpinCo shall be required to pay any interest on the proceeds from the sale of fractional shares. Neither the Agent nor the broker-dealers through which the aggregated fractional shares are sold shall be Affiliates of KAR or SpinCo. Solely for purposes of computing fractional share interests pursuant to this Section 3.4(c) and Section 3.4(d) , the beneficial owner of KAR Shares held of record in the name of a nominee in any nominee account shall be treated as the Record Holder with respect to such shares.
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(d)            Any SpinCo Shares or cash in lieu of fractional shares with respect to SpinCo Shares that remain unclaimed by any Record Holder one hundred and eighty (180) days after the Distribution Date shall be delivered to SpinCo, and SpinCo or its transfer agent shall hold such SpinCo Shares for the account of such Record Holder, and the Parties agree that all obligations to provide such SpinCo Shares and cash, if any, in lieu of fractional share interests shall be obligations of SpinCo, subject in each case to applicable escheat or other abandoned property Laws, and KAR shall have no Liability with respect thereto.

(e)            Until the SpinCo Shares are duly transferred in accordance with this Section 3.4 and applicable Law, from and after the Effective Time, SpinCo will regard the Persons entitled to receive such SpinCo Shares as record holders of SpinCo Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons. SpinCo agrees that, subject to any transfers of such shares, from and after the Effective Time, (i) each such holder will be entitled to receive all dividends, if any, payable on, and exercise voting rights and all other rights and privileges with respect to, the SpinCo Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the SpinCo Shares then held by such holder.

ARTICLE IV

MUTUAL RELEASES; INDEMNIFICATION

        4.1     Release of Pre-Distribution Claims .

(a)            SpinCo Release of KAR. Except as provided in Section 4.1(c) , effective as of the Effective Time, SpinCo does hereby, for itself and each other member of the SpinCo Group, and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the SpinCo Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) KAR and the members of the KAR Group, and their respective successors and assigns, (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the KAR Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and (iii) all Persons who at any time prior to the Effective Time are or have been stockholders, directors, officers, agents or employees of a Transferred Entity and who are not, as of immediately following the Effective Time, directors, officers or employees of SpinCo or a member of the SpinCo Group, in each case from: (A) all SpinCo Liabilities, (B) all Liabilities arising from or in connection with the transactions contemplated by this Agreement and all other activities undertaken to implement the Internal Restructuring, Separation and the Distribution and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the SpinCo Business, the SpinCo Assets or the SpinCo Liabilities.
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(b)            KAR Release of SpinCo. Except as provided in Section 4.1(c) , effective as of the Effective Time, KAR does hereby, for itself and each other member of the KAR Group and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the KAR Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) SpinCo and the members of the SpinCo Group and their respective successors and assigns, (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the SpinCo Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and (iii) all Persons who at any time prior to the Effective Time are or have been directors, officers, agents or employees of a Transferred Entity and who are not, as of immediately following the Effective Time, directors, officers or employees of KAR or a member of the KAR Group, in each case from: (A) all KAR Liabilities, (B) all Liabilities arising from or in connection with the transactions contemplated by this Agreement and all other activities undertaken to implement the Internal Restructuring, Separation and the Distribution and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the KAR Business, the KAR Assets or the KAR Liabilities.

(c)            Obligations Not Affected . Nothing contained in Section 4.1(a) or 4.1(b)   shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.8(b)   or the applicable Schedules thereto as not terminating as of the Effective Time, in each case in accordance with its terms. In furtherance of the foregoing, nothing contained in Section 4.1(a) or 4.1(b) shall release any Person from:

(i)            any Liability provided in or resulting from any agreement among any members of the KAR Group or the SpinCo Group that is specified in Section 2.8(b) or the applicable Schedules thereto as not terminating as of the Effective Time, or any other Liability specified in Section 2.8(b) as not to terminate as of the Effective Time;

(ii)            any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of either Group under, this Agreement or any Ancillary Agreement;

(iii)            any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

(iv)            any Liability that the Parties may have pursuant to this Agreement or any Ancillary Agreement, including with respect to indemnification or contribution pursuant to this Agreement, any Ancillary Agreement or otherwise for claims brought against the Parties by Third Parties, which Liability shall be governed by the provisions of this Article IV and Article V and, if applicable, the appropriate provisions of the Ancillary Agreements; or
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(v)            any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.1 .

In addition, nothing contained in Section 4.1(a) and Section 4.1(b) shall release any member of the KAR Group or the SpinCo Group from honoring its existing obligations to indemnify any director, officer, employee or agent of SpinCo who was a director, officer, employee or agent of any member of the KAR Group on or prior to the Effective Time, to the extent such director, officer or employee becomes a named defendant in any Action with respect to which such director, officer or employee was entitled to such indemnification pursuant to such existing obligations; it being understood that, if the underlying obligation giving rise to such Action is an SpinCo Liability, SpinCo shall indemnify KAR for such Liability (including KAR’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article IV .

(d)            No Claims . SpinCo shall not make, and shall not permit any member of the SpinCo Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against KAR or any other member of the KAR Group, or any other Person released pursuant to Section 4.1(a) , with respect to any Liabilities released pursuant to Section 4.1(a) . KAR shall not make, and shall not permit any other member of the KAR Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against SpinCo or any other member of the SpinCo Group, or any other Person released pursuant to Section 4.1(b) , with respect to any Liabilities released pursuant to Section 4.1(b) .

(e)            Execution of Further Releases . At any time at or after the Effective Time, at the request of either Party, the other Party shall cause each member of such Party’s respective Group to execute and deliver releases reflecting the provisions of this Section 4.1 .

        4.2     Indemnification by SpinCo . Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, SpinCo shall, and shall cause the other members of the SpinCo Group to, indemnify, defend and hold harmless KAR, each member of the KAR Group and each of their respective past, present and future directors, officers, employees and agents, in each case, in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ KAR Indemnitees ”), from and against any and all Liabilities of the KAR Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a)            any SpinCo Liability;

(b)            any failure of SpinCo, any other member of the SpinCo Group or any other Person to pay, perform or otherwise promptly discharge any SpinCo Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;
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(c)            any breach by SpinCo or any other member of the SpinCo Group of this Agreement or any of the Ancillary Agreements;

(d)            except to the extent it relates to a KAR Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the SpinCo Group by any member of the KAR Group that survives following the Distribution;

(e)            the ownership or operation of the SpinCo Business from and after the Effective Time; and

(f)            any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in the Form 10, the Information Statement (as amended or supplemented if SpinCo shall have furnished any amendments or supplements thereto) or any other Disclosure Document, other than the matters described in subclause (f) of Section 4.3 .

        4.3     Indemnification by KAR . Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, KAR shall, and shall cause the other members of the KAR Group to, indemnify, defend and hold harmless SpinCo, each member of the SpinCo Group and each of their respective past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ SpinCo Indemnitees ”), from and against any and all Liabilities of the SpinCo Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a)            any KAR Liability;

(b)            any failure of KAR, any other member of the KAR Group or any other Person to pay, perform or otherwise promptly discharge any KAR Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

(c)            any breach by KAR or any other member of the KAR Group of this Agreement or any of the Ancillary Agreements;

(d)            except to the extent it relates to an SpinCo Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the KAR Group by any member of the SpinCo Group that survives following the Distribution;

(e)            the ownership or operation of the KAR Business from and after the Effective Time; and

(f)            any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to statements made explicitly in KAR’s name in the Form 10, the Information Statement (as amended or supplemented if SpinCo shall have furnished any amendments or supplements thereto) or any other Disclosure Document; it being agreed that the statements set forth on Schedule 4.3(f)   shall be the only statements made explicitly in KAR’s name in the Form 10, the Information Statement or any other Disclosure Document, and all other information contained in the Form 10, the Information Statement or any other Disclosure Document shall be deemed to be information supplied by SpinCo.
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        4.4 Indemnification Obligations Net of Insurance Proceeds and Other Amounts

(a)            The Parties intend that the indemnification, contribution or reimbursement with respect to any Liability pursuant to this Article IV or Article V shall be net of Insurance Proceeds and other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) from any Person by or on behalf of the Indemnitee in respect of any indemnifiable Liability. Accordingly, the amount which either Party (an “ Indemnifying Party ”) is required to pay to any Person entitled to indemnification, contribution or reimbursement hereunder (an “ Indemnitee ”) shall be reduced by any Insurance Proceeds and other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) from any Person by or on behalf of the Indemnitee in respect of the related Liability. For avoidance of doubt and to illustrate the operation of this Section 4.4 , if SpinCo should be responsible to indemnify KAR for an insured Liability, and the claim for that Liability to an insurer results in a deductible or loss reimbursement and a retrospectively rated premium adjustment, SpinCo shall be responsible for the deductible or loss reimbursement and the retrospectively rated premium adjustment. If an Indemnitee receives an indemnification, contribution or reimbursement payment (an “ Indemnity Payment ”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or any other amounts in respect of the related Liability, then the Indemnitee shall pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) had been received, realized or recovered before the Indemnity Payment was made.

(b)            The Parties agree that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement or any Ancillary Agreement, have any subrogation rights with respect thereto, it being understood that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification, contribution and reimbursement provisions hereof. Each Party shall, and shall cause the members of such Party’s Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification, contribution or reimbursement may be available under this Article IV . Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification, contribution or reimbursement, or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.
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        4.5 Procedures for Indemnification of Third-Party Claims .

(a)            Notice of Claims . If, at or following the date of this Agreement, an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) that is not a member of the KAR Group or the SpinCo Group of any claim or of the commencement by any such Person of any Action (collectively, a “ Third-Party Claim ”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 4.2 or 4.3 , or any other Section of this Agreement or any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as practicable, but in any event within fourteen (14) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 4.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced in some material respect by the Indemnitee’s failure to provide notice in accordance with this Section 4.5(a) .

(b)            Control of Defense. An Indemnifying Party may elect to defend (and seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim; provided that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any such Liabilities to the extent resulting from, or arising out of, such Third-Party Claim. Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (ii) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim. Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 4.5(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim and specifying any reservations or exceptions to its defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in Section 4.5(a) , then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim.
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(c)            Allocation of Defense Costs . If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, whether with or without any reservations or exceptions with respect to such defense, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification, contribution or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in Section 4.5(a) , and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

(d)            Right to Monitor and Participate. An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, as applicable, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 4.5(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, but subject to Sections 6.7 and 6.8 , such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation in connection with a Third-Party Claim inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

(e)            No Settlement. Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages that are fully payable by the settling or compromising Party, does not involve any admission, finding or determination of wrongdoing or violation of Law by the other Party and provides for a full, unconditional and irrevocable release of the other Party from all Liability in connection with the Third-Party Claim.
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        4.6 Additional Matters

(a)            Timing of Payments. Indemnification or contribution payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification, contribution or reimbursement under this Article IV shall be paid reasonably promptly (but in any event within thirty (30) days of the final determination of the amount that the Indemnitee is entitled to indemnification, contribution or reimbursement under this Article IV ) by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification, contribution or reimbursement payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities. The indemnification, contribution and reimbursement provisions contained in this Article IV shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee, and (ii) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification hereunder.

(b)            Notice of Direct Claims . Any claim for indemnification, contribution or reimbursement under this Agreement or any Ancillary Agreement that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the applicable Indemnifying Party; provided , that the failure by an Indemnitee to so assert any such claim shall not prejudice the ability of the Indemnitee to do so at a later time except to the extent (if any) that the Indemnifying Party is prejudiced in some material respect thereby. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30)-day period, such specified claim shall be conclusively deemed a Liability of the Indemnifying Party under this Section 4.6(b) or, in the case of any written notice in which the amount of the claim (or any portion thereof) is estimated, on such later date when the amount of the claim (or such portion thereof) becomes finally determined. If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnitee shall, subject to the provisions of Article VII , be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements, as applicable, without prejudice to its continuing rights to pursue indemnification or contribution hereunder.

(c)            Pursuit of Claims Against Third Parties. If (i) a Party incurs any Liability arising out of this Agreement or any Ancillary Agreement, (ii) an adequate legal or equitable remedy is not available for any reason against the other Party to satisfy the Liability incurred by the incurring Party, and (iii) a legal or equitable remedy may be available to the other Party against a Third Party for such Liability, then the other Party shall use its commercially reasonable efforts to cooperate with the incurring Party, at the incurring Party’s expense, to permit the incurring Party to obtain the benefits of such legal or equitable remedy against the Third Party.

(d)            Subrogation . In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.
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(e)            Substitution . In the event of an Action in which the Indemnifying Party is not a named defendant, if either the Indemnitee or Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in Section 4.5 and this Section 4.6 , and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts fees and all other external expenses), the costs of any judgment or settlement and the cost of any interest or penalties relating to any judgment or settlement.

        4.7 Right of Contribution

(a)            Contribution . If any right of indemnification contained in Section 4.2 or Section 4.3 is held unenforceable or is unavailable for any reason, or is insufficient to hold harmless an Indemnitee in respect of any Liability for which such Indemnitee is entitled to indemnification hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnitees as a result of such Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the members of the Indemnifying Party’s Group, on the one hand, and the Indemnitees entitled to contribution, on the other hand, as well as any other relevant equitable considerations.

(b)            Allocation of Relative Fault . Solely for purposes of determining relative fault pursuant to this Section 4.7 : (i) any fault associated with the business conducted with the Delayed SpinCo Assets or Delayed SpinCo Liabilities (except for the gross negligence or intentional misconduct of a member of the KAR Group) or with the ownership, operation or activities of the SpinCo Business prior to the Effective Time shall be deemed to be the fault of SpinCo and the other members of the SpinCo Group, and no such fault shall be deemed to be the fault of KAR or any other member of the KAR Group; (ii) any fault associated with the business conducted with Delayed KAR Assets or Delayed KAR Liabilities (except for the gross negligence or intentional misconduct of a member of the SpinCo Group) shall be deemed to be the fault of KAR and the other members of the KAR Group, and no such fault shall be deemed to be the fault of SpinCo or any other member of the SpinCo Group; and (iii) any fault associated with the ownership, operation or activities of the KAR Business prior to the Effective Time shall be deemed to be the fault of KAR and the other members of the KAR Group, and no such fault shall be deemed to be the fault of SpinCo or any other member of the SpinCo Group.

4.8 Covenant Not to Sue  . Each Party hereby covenants and agrees that none of it, the members of such Party’s Group or any Person claiming through it shall bring suit or otherwise assert any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator, mediator or administrative agency anywhere in the world, alleging that: (a) the assumption of any SpinCo Liabilities by SpinCo or a member of the SpinCo Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; (b) the retention of any KAR Liabilities by KAR or a member of the KAR Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason, or (c) the provisions of this Article IV are void or unenforceable for any reason.
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4.9     Remedies Cumulative . The remedies provided in this Article IV shall be cumulative and, subject to the provisions of Article VIII , shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

4.10 Survival of Indemnities .  The rights and obligations of each of KAR and SpinCo and their respective Indemnitees under this Article IV shall survive (a) the sale or other transfer by either Party or any member of such Party’s Group of any assets or businesses or the assignment by it of any liabilities, or (b) any merger, consolidation, business combination, sale of all or substantially all of its Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of the members of such Party’s Group.

4.11 Tax Matters Agreement Governs . The above provisions of this Article IV do not apply to Taxes (it being understood and agreed that Taxes and Tax Matters shall be governed by the Tax Matters Agreement). In the case of any conflict between this Agreement and the Tax Matters Agreement in relation to any matters addressed by the Tax Matters Agreement, the Tax Matters Agreement shall govern.

        4.12 Employee Matters Agreement Governs. The above provisions of Article II and this Article IV do not apply to employee matters (it being understood and agreed that employee matters shall be governed by the Employee Matters Agreement). In the case of any conflict between this Agreement and the Employee Matters Agreement in relation to any matters addressed by the Employee Matters Agreement, the Employee Matters Agreement shall govern.

ARTICLE V

CERTAIN OTHER MATTERS

        5.1 Insurance Matters

(a)            KAR and SpinCo agree to cooperate in good faith to provide for an orderly transition of insurance coverage from the date hereof through the Effective Time. In no event shall KAR, any other member of the KAR Group or any KAR Indemnitee have any Liability or obligation whatsoever to any member of the SpinCo Group in the event that any insurance policy or other contract or policy of insurance shall be terminated or otherwise cease to be in effect for any reason, shall be unavailable or inadequate to cover any Liability of any member of the SpinCo Group for any reason whatsoever or shall not be renewed or extended beyond the current expiration date.

(b)            From and after the Effective Time, with respect to any losses, damages and Liability incurred by any member of the SpinCo Group, or arising out of facts, events or circumstances occurring, prior to the Effective Time, KAR will provide SpinCo with access to, and SpinCo may, upon ten (10) days’ prior written notice to KAR, make claims under, KAR’s third-party insurance policies in place immediately prior to the Effective Time and KAR’s historical third-party policies of insurance, but solely to the extent that such policies provided coverage for SpinCo Liabilities or Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time, in each case relating to, arising out of or resulting from the SpinCo Business, the SpinCo Assets or the SpinCo Liabilities; provided that such access to, and the right to make claims under, such insurance policies shall be subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles, self-insured retentions, loss reimbursements and other fees and expenses, and any retrospectively rated or other premium adjustments, resulting from such losses, damages or Liability. Any deductible, loss reimbursement, other fee or expense, or retrospectively rated or other premium adjustment, resulting from such losses, damages or Liability shall be SpinCo’s sole responsibility. SpinCo’s access shall be subject to the following additional conditions:
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(i)            SpinCo shall report any claim to KAR, as promptly as practicable, and in any event in sufficient time so that such claim may be made in accordance with KAR’s claim reporting procedures in effect immediately prior to the Effective Time (or in accordance with any modifications to such procedures after the Effective Time communicated by KAR to SpinCo in writing);

(ii)            SpinCo may, in its sole discretion, report such claim to the insurers on its and/or SpinCo’s behalf with a request that the insurers defend and indemnify it and/or SpinCo;

(iii)            SpinCo and the members of the SpinCo Group shall indemnify, hold harmless and reimburse KAR and the members of the KAR Group for any fees and expenses incurred by KAR or any members of the KAR Group to the extent resulting from any access to, any claims made by SpinCo or any other members of the SpinCo Group under, any insurance provided pursuant to this Section 5.1(b) , including any indemnity payments, settlements, judgments, legal fees and allocated claim or loss adjusting expenses and claim handling fees, whether such claims are made by SpinCo, its employees or Third Parties; and

(iv)            SpinCo shall exclusively bear (and neither KAR nor any members of the KAR Group shall have any obligation to repay or reimburse SpinCo or any member of the SpinCo Group for) and shall be liable for all uninsured, uncovered, unavailable or uncollectible amounts of all such claims made by SpinCo or any member of the SpinCo Group under the policies as provided for in this Section 5.1(b) .

In the event that any member of the KAR Group incurs any losses, damages or Liability prior to or in respect of the period prior to the Effective Time for which such member of the KAR Group is entitled to coverage under SpinCo’s third-party insurance policies, the same process pursuant to this Section 5.1(b) shall apply, substituting “KAR” for “SpinCo” and “SpinCo” for “KAR.”

(c)            Except as provided in Section 5.1(b) , from and after the Effective Time, neither SpinCo nor any member of the SpinCo Group shall have any rights to or under any of the insurance policies of KAR or any other member of the KAR Group. At the Effective Time, SpinCo shall have in effect all insurance programs required to comply with SpinCo’s contractual obligations and such other insurance policies required by Law or as reasonably necessary or appropriate for companies operating a business similar to SpinCo’s. Such insurance programs may include general liability, commercial auto liability, workers’ compensation, employer’s liability, cyber security, product liability, professional services liability, property, open lot, employment practices liability, employee dishonesty/crime, directors and officers liability and fiduciary liability.
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(d)            Neither SpinCo nor any member of the SpinCo Group, in connection with making a claim under any insurance policy of KAR or any member of the KAR Group pursuant to this Section 5.1 , shall take any action that would be reasonably likely to (i) have an adverse impact on the then-current relationship between KAR or any member of the KAR Group, on the one hand, and the applicable insurance company, on the other hand, (ii) result in the applicable insurance company terminating or materially reducing coverage, or materially increasing the amount of any premium owed by KAR or any member of the KAR Group under the applicable insurance policy, or (iii) otherwise compromise, jeopardize or interfere with the rights of KAR or any member of the KAR Group under the applicable insurance policy.

(e)            All payments and reimbursements by SpinCo pursuant to this Section 5.1 will be made within fifteen (15) days after SpinCo’s receipt of an invoice therefor from KAR. If KAR incurs costs to enforce SpinCo’s obligations herein, SpinCo agrees to indemnify and hold harmless KAR for such enforcement costs, including reasonable attorneys’ fees pursuant to Section 4.6 . KAR shall retain the exclusive right to control its insurance policies and programs, including the right under the policies or applicable law to settle the policies to which losses or claim expenses are allocated, to exhaust, settle, release, commute, buy-back or otherwise resolve disputes with respect to any of its insurance policies and programs and to amend, modify or waive any rights under any such insurance policies and programs, notwithstanding whether any such policies or programs apply to any SpinCo Liabilities and/or claims SpinCo has made or could make in the future, and no member of the SpinCo Group shall allocate losses or claims or loss adjusting expenses to, or erode, exhaust, settle, release, commute, buy-back or otherwise resolve disputes with KAR’s insurers with respect to any of KAR’s insurance policies and programs, or amend, modify or waive any rights under any such insurance policies and programs. SpinCo shall cooperate with KAR and share such information as is reasonably necessary to permit KAR to manage and conduct its insurance matters as it deems appropriate. KAR shall share such information with SpinCo as is reasonable necessary to enable SpinCo so to cooperate with KAR. Except as otherwise expressly provided in this Agreement, neither KAR nor any of the members of the KAR Group shall have any obligation to secure extended reporting for any claims under any liability policies of KAR or any member of the KAR Group for any acts or omissions by any member of the SpinCo Group incurred prior to the Effective Time.

(f)            This Agreement shall not be considered as a contract of insurance and shall not be construed to waive any right or remedy of any member of the KAR Group in respect of any insurance policy or any other contract or policy of insurance.

(g)            SpinCo does hereby, for itself and each other member of the SpinCo Group, agree that no member of the KAR Group shall have any Liability whatsoever as a result of the insurance policies and practices of KAR and the members of the KAR Group as in effect at any time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.
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        5.2 Continuation of Director and Officer Insurance .  For a period of not less than six (6) years from and after the Distribution Date, KAR shall, and shall cause the KAR Group to, maintain directors and officers liability insurance covering the persons who are presently covered by KAR’s and its Subsidiaries’ directors and officers liability insurance policies with respect to actions and omissions occurring prior to the Distribution Date, providing coverage not less favorable than provided by such insurance in effect on the date hereof.

        5.3 Late Payments . Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to Prime Rate plus one percent (1%).

        5.4 Treatment of Payments for Tax Purposes . Unless otherwise required by a Final Determination, this Agreement or the Tax Matters Agreement, the Parties agree that any payment made pursuant to this Agreement (other than payments with respect to interest accruing after the Effective Time) by: (i) SpinCo to KAR shall be treated for all tax purposes as a distribution by SpinCo to KAR with respect to SpinCo Shares occurring immediately before the Distribution; (ii) KAR to SpinCo shall be treated for all tax purposes as a tax-free contribution by KAR to SpinCo with respect to its stock occurring immediately before the Distribution; and (iii) any payment of interest shall be treated as taxable or deductible, as the case may be, to the Party entitled under this Agreement to retain such payment or required under this Agreement to make such payment. No Party shall take any position inconsistent with this Section 5.4 , and, in the event that a Governmental Authority asserts that a Party’s treatment of a payment pursuant to this Agreement should be other than as set forth in this Section 5.4 , such Party shall use its commercially reasonable efforts to contest such challenge.

5.5 Inducement.   SpinCo acknowledges and agrees that KAR’s willingness to cause, effect and consummate the Separation and the Distribution has been conditioned upon and induced by SpinCo’s covenants and agreements in this Agreement and the Ancillary Agreements, including SpinCo’s assumption of the SpinCo Liabilities pursuant to the Separation and the provisions of this Agreement and SpinCo’s covenants and agreements contained in Article IV .

5.6 Post-Effective Time Conduct . The Parties acknowledge that, after the Effective Time, each Party shall be independent of the other Party, with responsibility for its own actions and inactions and its own Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Effective Time, except as may otherwise be provided in any Ancillary Agreement, and each Party shall (except as otherwise provided in Article IV ) use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party.
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        5.7 Restricted Businesses . Each Party hereby agrees that from and after the Effective Time such Party shall, and shall cause the members of its respective Group and its respective Affiliates to, act in accordance with the provisions prescribed by the restricted businesses covenant, attached hereto as Exhibit C .

ARTICLE VI

EXCHANGE OF INFORMATION; CONFIDENTIALITY

        6.1 Agreement for Exchange of Information

(a)            Each of KAR and SpinCo acknowledge and agree that certain books, records and other tangible Information is and, as of the Effective Time, will be stored in locations that will be allocated, assigned, transferred, conveyed and delivered to the KAR Group or the SpinCo Group, as the case may be, and that from and after the Effective Time, such tangible books and records may remain at the current locations thereof, subject to the terms and conditions of this Article VI.  From and after the Effective Time, (i) each member of the SpinCo Group shall be permitted to obtain from the KAR Group, and KAR shall cause each member of the KAR Group to cooperate to provide and deliver to SpinCo or the applicable member of the SpinCo Group, the originals of all books, records and other tangible Information that constitutes SpinCo Assets, subject to the terms and conditions of this Article VI , and (ii) each member of the KAR Group shall be permitted to obtain from the SpinCo Group, and SpinCo shall cause each member of the SpinCo Group to cooperate to provide and deliver to KAR or the applicable member of the KAR Group, the originals of all books, records and other tangible Information that constitutes KAR Assets, subject to the terms and conditions of this Article VI .  For the avoidance of any doubt, (i) each member of the KAR Group shall be permitted to deliver any books, records or other tangible Information that constitutes SpinCo Assets to SpinCo (or such location as may be designated by SpinCo), (ii) each member of the SpinCo Group shall be permitted to deliver any books, records or other tangible Information that constitutes KAR Assets to KAR (or such location as may be designated by KAR), and (iii) subject to Section 6.4 , neither Party nor any member of its Group shall be required to store or maintain any books, records or other tangible Information for the benefit of the other Party or its Group.

(b)            Subject to Section 6.9 and any other applicable confidentiality obligations, each of KAR and SpinCo, on behalf of itself and each member of such Party’s Group, agrees to use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party and the members of such other Party’s Group, at any time before, on or after the Effective Time, as soon as reasonably practicable after written request therefor, any information (or a copy thereof) in the possession or under the control of such Party or such Party’s Group which the requesting Party or such Party’s Group to the extent that (i) such information relates to the SpinCo Business, or any SpinCo Asset or SpinCo Liability, if SpinCo is the requesting Party, or to the KAR Business, or any KAR Asset or KAR Liability, if KAR is the requesting Party, (ii) such information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement or (iii) such information is required by the requesting Party to comply with any obligation imposed by any Governmental Authority; provided , however , that, in the event that the Party to whom the request has been made determines that any such provision of information could be detrimental in any material respect to the Party providing the information, violate any Law or agreement, or waive any privilege available under applicable Law, including any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. The Party providing information pursuant to this Section 6.1 shall only be obligated to provide such information in the form, condition and format in which it then exists, and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such information, and nothing in this Section 6.1 shall expand the obligations of a Party under Section 6.4 .
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(c)            Without limiting the generality of the foregoing, until the first SpinCo fiscal year end occurring after the Effective Time (and for a reasonable period of time afterwards as required for each Party to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), each Party shall use its commercially reasonable efforts to cooperate with the other Party’s information requests to enable (i) the other Party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated under the Exchange Act, and (ii) the other Party’s accountants to timely complete their review of the quarterly financial statements and audit of the annual financial statements, including, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and any other applicable Laws.

 6.2   6.2     Ownership of Information . The provision of any information pursuant to Section 6.1 or Section 6.7 shall not affect the ownership of such information (which shall be determined solely in accordance with the terms of this Agreement and the Ancillary Agreements), or constitute a grant of rights in or to any such information.

6.3            Compensation for Providing Information . The Party requesting information shall not be required to pay or reimburse the other Party for the cost of creating, gathering, copying, transporting and otherwise complying with a request with respect to such information (including those expenses incurred in any review of information for purposes of protecting the Privileged Information of the providing Party or in connection with the restoration of backup media for purposes of providing the requested information); provided , however , that the Party requesting information shall be required to pay or reimburse the other Party for such costs in connection with any request resulting in a significant burden on the other Party, involving an unusually high volume of requested information, or otherwise arising outside the ordinary course of such requests.

6.4           Record Retention . To facilitate the possible exchange of information pursuant to this Article VI and other provisions of this Agreement after the Effective Time, the Parties agree to use their respective commercially reasonable efforts, which shall be no less rigorous than those used for retention of such Party’s own information, to retain all information in their respective possession or control on the Effective Time in accordance with the policies of KAR as in effect on the Effective Time or such other policies as may be adopted by KAR after the Effective Time ( provided , in the case of SpinCo, that KAR notifies SpinCo of any such change); provided , however , that in the case of any information relating to Taxes, such retention period shall be extended to the expiration of the applicable statute of limitations (giving effect to any extensions thereof). Notwithstanding the foregoing, the Tax Matters Agreement will govern the retention of Tax related records, and the Employee Matters Agreement will govern the retention of employment and benefits related records.  Without limiting the foregoing retention obligations of the Parties, before destroying or disposing of any books, records or other tangible Information relating to the business, Assets or Liabilities of the other Party’s Group, (i) the Party proposing to dispose of or destroy such tangible Information shall use commercially reasonable efforts to provide no less than ninety (90) days prior written notice to the other Party, specifying the books, records or other tangible Information proposed to be destroyed or disposed of and (ii) if, before the scheduled date for such destruction or disposal, the other Party requests in writing that any of the books, records or other tangible Information proposed to be destroyed or disposed of be delivered or made available to such other Party, then the Party proposing to destroy or dispose of the books, records or other tangible Information will promptly arrange for the delivery or making available of the requested books, records or other tangible Information to or at a location specified by, and at the sole cost and expense of, the requesting Party.  Notwithstanding the foregoing, each Party may destroy or dispose of any books, records or other tangible Information that the other Party has previously received copies of, without any obligation to notify the other Party thereof.
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 6.5   6.5     Limitations of Liability . Neither Party shall have any Liability to the other Party in the event that any information exchanged or provided pursuant to this Agreement is found to be inaccurate in the absence of gross negligence or willful misconduct by the Party providing such information. Neither Party shall have any Liability to any other Party if any information is destroyed after commercially reasonable efforts by such Party to comply with the provisions of Section 6.4 .

      6.6     Other Agreements Providing for Exchange of Information .

(a)            The rights and obligations granted under this Article VI are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of information set forth in any Ancillary Agreement.

(b)            Any party that receives, pursuant to a request for information in accordance with this Article VI , Tangible Information that is not relevant to its request shall (i) return such Tangible Information to the providing Party or, at the providing Party’s request, destroy such Tangible Information, and (ii) deliver to the providing Party written confirmation that such Tangible Information was returned or destroyed, as the case may be, which confirmation shall be signed by an authorized representative of the requesting Party.

(c)            Notwithstanding Section 7.1 , in the event of any Dispute between or among one or more members of the SpinCo Group and one or more members of the KAR Group relating to the rights and obligations of the Parties with respect to the exchange, access and retention of Information hereunder, the Parties shall attempt in good faith to negotiate a resolution of the Dispute through the Parties’ respective record administrators, in the first instance and, if the records administrators cannot resolve the Dispute, then the Dispute may be resolved pursuant to the terms and procedures set forth in Article VII .
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        6.7     Production of Witnesses; Records; Cooperation

(a)            After the Effective Time, except in the case of an adversarial Action or Dispute between KAR and SpinCo, or any members of their respective Groups, each Party shall use its commercially reasonable efforts to make available to the other Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of such Party’s respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party (or member of such Party’s Group) may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all costs and expenses in connection therewith.

(b)            If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third-Party Claim, the other Party shall make available to such Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of such Party’s respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

(c)            Without limiting the foregoing, the Parties shall cooperate and consult to the extent reasonably necessary with respect to any Actions.

(d)            Without limiting any provision of this Section 6.7 , each of the Parties agrees to cooperate, and to cause each member of its respective Group to cooperate, with each other in the defense of any infringement or similar claim with respect any Intellectual Property and shall not claim to acknowledge, or permit any member of such Party’s respective Group to claim to acknowledge, the validity or infringing use of any Intellectual Property of a Third Party in a manner that would hamper or undermine the defense of such infringement or similar claim.

(e)            The obligation of the Parties to provide witnesses pursuant to this Section 6.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 6.7(a) ).
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        6.8     Privileged Matters

(a)            The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the KAR Group and the SpinCo Group, and that each of the members of the KAR Group and the SpinCo Group should be deemed to be the client with respect to such services for the purposes of asserting all privileges and immunities which may be asserted under applicable Law in connection therewith. The Parties recognize that legal and other professional services will be provided following the Effective Time, which services will be rendered solely for the benefit of the KAR Group or the SpinCo Group, as the case may be.

(b)            The Parties agree as follows:

(i)            KAR shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the KAR Business and not to the SpinCo Business, whether or not the Privileged Information is in the possession or under the control of any member of the KAR Group or any member of the SpinCo Group. KAR shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any KAR Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the KAR Group or any member of the SpinCo Group; and

(ii)            SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the SpinCo Business and not to the KAR Business, whether or not the Privileged Information is in the possession or under the control of any member of the SpinCo Group or any member of the KAR Group. SpinCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any SpinCo Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the SpinCo Group or any member of the KAR Group.

(iii)            If the Parties do not agree as to whether certain information is Privileged Information, then such information shall be treated as Privileged Information, and the Party that believes that such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any such information unless the Parties otherwise agree. The Parties shall use the procedures set forth in Article VII to resolve any disputes as to whether any information relates solely to the KAR Business, solely to the SpinCo Business, or to both the KAR Business and the SpinCo Business.

(c)            Subject to the remaining provisions of this Section 6.8 , the Parties agree that they shall have a shared privilege or immunity with respect to all privileges and immunities not allocated pursuant to Section 6.8(b) and all privileges and immunities relating to any Actions or other matters that involve both Parties (or one or more members of their respective Groups) and in respect of which both Parties have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either Party without the consent of the other Party.
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(d)            If any Dispute arises between the Parties or any members of their respective Group regarding whether a privilege or immunity should be waived to protect or advance the interests of either Party and/or any member of their respective Group, each Party agrees that it shall (i) negotiate with the other Party in good faith, (ii) endeavor to minimize any prejudice to the rights of the other Party, and (iii) not unreasonably withhold consent to any request for waiver by the other Party. Further, each Party specifically agrees that it shall not withhold its consent to the waiver of a privilege or immunity for any purpose except in good faith to protect its own legitimate interests.

(e)            In the event of any adversarial Action or Dispute between KAR and SpinCo, or any members of their respective Groups, either Party may waive a privilege in which the other Party or member of such other Party’s Group has a shared privilege, without obtaining consent pursuant to Section 6.8(c) ; provided that such waiver of a shared privilege shall be effective only as to the use of information with respect to the Action between the Parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to any Third Party.

(f)            Upon receipt by either Party, or by any member of such Party’s respective Group, of any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of Privileged Information subject to a shared privilege or immunity or as to which another Party has the sole right hereunder to assert a privilege or immunity, or if either Party obtains knowledge that any of its, or any member of such Party’s respective Group’s, current or former directors, officers, agents or employees has received any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request (which notice shall be delivered to such other Party no later than five (5) business days following the receipt of any such subpoena, discovery or other request) and shall provide the other Party a reasonable opportunity to review the Privileged Information and to assert any rights it or they may have under this Section 6.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

(g)            Any furnishing of, or access or transfer of, any information pursuant to this Agreement is made in reliance on the covenants and agreements of KAR and SpinCo set forth in this Section 6.8 and in Section 6.9 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges and immunities. The Parties agree that (i) their respective rights to any access to information, witnesses and other Persons, the furnishing of notices and documents and other cooperative efforts between the Parties contemplated by this Agreement, and the transfer of Privileged Information between the Parties and members of their respective Groups pursuant to this Agreement, shall not be deemed a waiver of any privilege or immunity that has been or may be asserted under this Agreement or otherwise and (ii) in the event of any transfer by one Party to the other Party of any Privileged Information that should not have been transferred pursuant to the terms of this Article VI , the Party receiving such Privileged Information shall promptly return such Privileged Information to and at the request of the Party that has the right to assert the privilege or immunity and without prejudice to any longer period that may be provided for in any of the Ancillary Agreements.
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(h)            In connection with any matter contemplated by Section 6.7 or this Section 6.8 , the Parties agree to, and to cause the applicable members of their Group to, use commercially reasonable efforts to maintain their respective separate and joint privileges and immunities, including by executing joint defense and/or common interest agreements where necessary or useful for this purpose.

        6.9     Confidentiality .            (a)          (a) Confidentiality. Subject to Section 6.10 , from and after the Effective Time until the five-year anniversary of the Distribution Date, each of KAR and SpinCo, on behalf of itself and each member of such Party’s respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to KAR’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses that is either in its possession (including confidential and proprietary information in its possession prior to the date hereof) or furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group. If any confidential and proprietary information of one Party or any member of such Party’s Group is disclosed to the other Party or any member of such other Party’s Group in connection with providing services to such first Party or any member of such first Party’s Group under this Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary information shall be used only as required to perform such services.

(b)            No Release; Return or Destruction . Each Party agrees not to release or disclose, or permit to be released or disclosed, any information addressed in Section 6.9(a) to any other Person, except its Representatives who need to know such information in their capacities as such (who shall be advised of their obligations hereunder with respect to such information), and except in compliance with Section 6.10 . Without limiting the foregoing, when any such information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party will promptly after request of the other Party either return to the other Party all such information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided , that the Parties may retain electronic back-up versions of such information maintained on routine computer system backup tapes, disks or other backup storage devices; provided   further , that any such information so retained shall remain subject to the confidentiality provisions of this Agreement or any Ancillary Agreement.
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(c)            Third-Party Information; Privacy or Data Protection Laws . Each Party acknowledges that it and members of such Party’s Group may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or personal information relating to, Third Parties (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or members of such Party’s Group, on the other hand, prior to the Effective Time, or (ii) that, as between the two Parties, was originally collected by the other Party or members of such Party’s Group and that may be subject to and protected by privacy, data protection or other applicable Laws. Each Party agrees that it shall hold, protect and use, and shall cause the members of such Party’s Group and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or personal information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or members of the other Party’s Group, on the one hand, and such Third Parties, on the other hand.

6.10            Protective Arrangements . In the event that a Party or any member of such Party’s Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.
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ARTICLE VII

DISPUTE RESOLUTION

        7.1     Good-Faith Officer Negotiation .  Either Party seeking resolution of any dispute, controversy or claim arising out of or relating to this Agreement or, except as otherwise provided therein, any Ancillary Agreement (including regarding whether any Assets are SpinCo Assets, any Liabilities are SpinCo Liabilities or the validity, interpretation, breach or termination of this Agreement or, except as otherwise provided therein, any Ancillary Agreement) (a “ Dispute ”) may provide written notice thereof to the other Party (the “ Initial Notice ”), and the Parties shall thereafter attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives of each Party who hold, at a minimum, the title of vice president and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

        7.2     Good-Faith CEO Negotiation . In the event that a Dispute has not been resolved pursuant to Section 7.1 within sixty (60) days after receipt by a Party of the Initial Notice, or within such longer period as the Parties may agree to in writing, the Party that delivered the Initial Notice shall provide written notice of such Dispute to the Chief Executive Officer of each Party (the “ CEO Notice ”). As soon as reasonably practicable following receipt of the CEO Notice, the Chief Executive Officers of the Parties shall begin conducting good-faith negotiations with respect to such Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

7.3     Resolution by Delaware Courts .   In the event that a Dispute has not been resolved pursuant to Section 7.2 within sixty (60) days after receipt by a Party of the CEO Notice, or within such longer period as the Parties may agree to in writing, then each party hereby agrees and consents to be subject to the jurisdiction of the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, to resolve any such unresolved Dispute in any suit, action or proceeding seeking to enforce any provision of, or based on any other matter arising out of or in connection with, this Agreement or the transactions contemplated hereby.  Notwithstanding the foregoing, nothing contained herein is intended to or shall be construed to prevent any Party from applying to any court of competent jurisdiction for injunctive or other similar equitable relief in connection with the subject matter of any Dispute, including in connection with the Parties’ rights and obligations pursuant to Section 5.7 and Exhibit C , to prevent irreparable harm prior to the expiration of the relevant notice and negotiation time periods provided under this Article VII .  Each party hereby irrevocably consents to the service of any and all process in any such suit, action or proceeding by the delivery of such process to such party at the address and in the manner provided in Section 10.5 hereof.  Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
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(b)            EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.2(b) .

        7.9     Conduct During Dispute Resolution Process . Unless otherwise agreed in writing, the Parties shall, and shall cause their respective members of their Group to, continue to honor all commitments under this Agreement and each Ancillary Agreement to the extent required by such agreements during the course of dispute resolution pursuant to the provisions of this Article VII , unless such commitments are the specific subject of the Dispute at issue.

ARTICLE VIII

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

        8.1     Further Assurances .

(a)            In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use its reasonable best efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b)            Without limiting the foregoing, prior to, on and after the Effective Time, each Party shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Approvals or Notifications of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the SpinCo Assets and the KAR Assets and the assignment and assumption of the SpinCo Liabilities and the KAR Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request, cost and expense of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.
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(c)            On or prior to the Effective Time, KAR and SpinCo in their respective capacities as direct and indirect stockholders of the members of their Groups, shall each ratify any actions which are reasonably necessary or desirable to be taken by KAR, SpinCo or any of the members of their respective Groups, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

(d)            KAR and SpinCo, and each of the members of their respective Groups, waive (and agree not to assert against any of the others) any claim or demand that any of them may have against any of the others for any Liabilities or other claims relating to or arising out of (i) the failure of SpinCo or any other member of the SpinCo Group, on the one hand, or of KAR or any other member of the KAR Group, on the other hand, to provide any notification or disclosure required under any state Environmental Law in connection with the Separation or the other transactions contemplated by this Agreement, including the transfer by any member of either Group to any member of the other Group of ownership or operational control of any Assets not previously owned or operated by such transferee, or (ii) any inadequate, incorrect or incomplete notification or disclosure under any such state Environmental Law by the applicable transferor. To the extent any Liability to any Governmental Authority or any Third Party arises out of any action or inaction described in clause (i) or (ii) above, the transferee of the applicable Asset hereby assumes and agrees to pay any such Liability.

        8.2     KAR Names . SpinCo shall, and shall cause the other members of the SpinCo Group to, within ninety (90) days after the Distribution Date, file all such documents with Governmental Authorities and otherwise take such steps as are necessary, to cause the members of the SpinCo Group to change their names (including any corporate name, assumed name, d/b/a or the like), as applicable, to names that do not include the KAR Marks or any name that is a derivation thereof or confusingly similar thereto.  In addition, as promptly as practicable following the Effective Time, but in no event later than ninety (90) days after the Distribution Date, SpinCo shall not use, and shall cause the members of the SpinCo Group to cease using, the KAR Marks and any name or mark that is a derivation thereof or confusingly similar thereto. Any use of the KAR Marks by the SpinCo Group prior to such cessation shall be in a manner consistent with such use as of the Effective Time.

ARTICLE IX

TERMINATION

9.1            Termination . This Agreement and all Ancillary Agreements may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by KAR, in its sole and absolute discretion, without the approval or consent of any other Person, including SpinCo and the stockholders of KAR. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by a duly authorized officer of each of the Parties.
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9.2             Effect of Terminatio n. In the event of any termination of this Agreement prior to the Effective Time, no Party (nor any of its directors, officers or employees) shall have any Liability or further obligation to the other Party by reason of this Agreement.

ARTICLE X

MISCELLANEOUS

        10.1     Counterparts; Entire Agreement; Corporate Power .           

                (a)          This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b)            This Agreement, the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c)            KAR represents on behalf of itself and each other member of the KAR Group, and SpinCo represents on behalf of itself and each other member of the SpinCo Group, as follows:

(i)            each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii)            this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

(d)            Each Party acknowledges that it and each other Party is executing certain of the Ancillary Agreements by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement or any Ancillary Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement or any Ancillary Agreement. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.
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10.2            Governing Law . This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware including all matters of validity, construction, effect, enforceability, performance and remedies.

10.3            Assignability . Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties and the parties thereto, respectively, and their respective successors and permitted assigns; provided , however , that neither Party nor any such party thereto may assign its rights or delegate its obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other Party hereto or other parties thereto, as applicable. Notwithstanding the foregoing, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement and the Ancillary Agreements (except as may be otherwise provided in any such Ancillary Agreement) in whole (i.e., the assignment of a party’s rights and obligations under this Agreement and all Ancillary Agreements all at the same time) in connection with a Change of Control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any member of its Group from being party to or undertaking a Change of Control; provided , that nothing in this Section 10.3 shall limit the terms of Section 5.7(b) .

10.4            Third-Party Beneficiaries . Except for the indemnification rights under this Agreement of any KAR Indemnitee or SpinCo Indemnitee in their respective capacities as such, and except as set forth in Section 5.2 , (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

10.5            Notices . All notices, requests, claims, demands or other communications under this Agreement and, to the extent, applicable and unless otherwise provided therein, under each of the Ancillary Agreements shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by electronic mail (for which a confirmation email is obtained), or sent by overnight courier (providing proof of delivery) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.5 ):
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If to KAR, to:
       
   
KAR Auction Services, Inc.
   
13085 Hamilton Crossing Boulevard
   
Carmel, Indiana 46032
   
Email:
becca.polak@karauctionservices.com
   
Attention:
Chief Legal Officer
       
 
with a copy (prior to the Effective Time) to:
       
   
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Email:
Sean.Doyle@skadden.com
     
Gregory.Fernicola@skadden.com
     
Dwight.Yoo@skadden.com
   
Attention:
Sean C. Doyle
     
Gregory A. Fernicola
     
Dwight S. Yoo
       
 
If to SpinCo, to:
       
   
Insurance Auto Auctions, Inc.
   
Two Westbrook Corporate Center, Suite 500
   
Westchester, Illinois 60154
   
Email:
jkett@iaai.com
     
skerley@iaai.com
   
Attention:
John Kett
     
Sidney Peryar
       
 
with a copy (prior to the Effective Time) to:
     
   
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Email:
Sean.Doyle@skadden.com
     
Gregory.Fernicola@skadden.com
     
Dwight.Yoo@skadden.com
   
Attention:
Sean C. Doyle
     
Gregory A. Fernicola
     
Dwight S. Yoo
       

A Party may, by notice to the other Party, change the address to which such notices are to be given.

10.6            Severability . If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.
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        10.7            Force Majeure . No Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay unless this Agreement has previously been terminated under Article IX . A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition, and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable.

10.8            No Set-Off . Except as set forth in any Ancillary Agreement or as otherwise mutually agreed to in writing by the Parties, neither Party nor any member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or any Ancillary Agreement, or (b) any other amounts claimed to be owed to the other Party or any member of its Group arising out of this Agreement or any Ancillary Agreement.

10.9            Publicity . Prior to the Effective Time, KAR shall be responsible for issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby or under any Ancillary Agreement and prior to making any filings with any Governmental Authority with respect thereto. From and after the Effective Time, for a period of 1 year, SpinCo shall consult with KAR prior to issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby or under any Ancillary Agreement and prior to making any filings with any Governmental Authority with respect thereto.

10.10            Expenses . Except as otherwise expressly set forth in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all costs and expenses in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Separation, the Form 10 and the consummation of the transactions contemplated hereby and thereby incurred (i) on or prior to the Effective Time will be borne by KAR and (ii) after the Effective Time will be borne by the Party or its applicable Subsidiary incurring such costs or expenses.
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10.11            Headings . The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

10.12            Survival of Covenants . Except as expressly set forth in this Agreement or any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect.

10.13            Waivers of Default . Waiver by a Party of any default by the other Party of any provision of this Agreement or any Ancillary Agreement shall be in writing and shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement or any Ancillary Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

10.14            Specific Performance . From and after the Distribution, subject to the provisions of Article VII (including, for the avoidance of doubt, after compliance with all notice and negotiation provisions provided herein), in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their respective rights under this Agreement or such Ancillary Agreement, as applicable, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

10.15            Amendments . No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

10.16            Interpretation . In this Agreement and any Ancillary Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires, (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement (or the applicable Ancillary Agreement) as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement), (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified, (d) unless otherwise stated, all references to any agreement (including this Agreement and any Ancillary Agreement) shall be deemed to include the exhibits, schedules and annexes (including all Schedules, Exhibits and Appendices) to such agreement, (e) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) shall mean “including, without limitation,” unless otherwise specified, (f) the word “or” shall not be exclusive, (g) unless otherwise specified in a particular case, the word “days” refers to calendar days, (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or New York, New York, (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified, and (j) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to June 27, 2019.
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10.17            Limitations of Liability . Notwithstanding anything in this Agreement to the contrary, neither SpinCo or any member of the SpinCo Group, on the one hand, nor KAR or any member of the KAR Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

10.18            Performance . KAR will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the KAR Group. SpinCo will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the SpinCo Group. Each Party (including such Party’s permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement and any applicable Ancillary Agreement to all of the other members of such Party’s Group and (b) cause all of the other members of such Party’s Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby.

10.19            Mutual Drafting . This Agreement and the Ancillary Agreements shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives as of the date first written above.


 
KAR AUCTION SERVICES, INC.
     
     
 
By:
/s/ Eric M. Loughmiller
   
Name: Eric M. Loughmiller
   
Title: Executive Vice President and Chief Financial Officer
     
 
IAA, INC.
     
     
 
By:
/s/ John W. Kett
   
Name: John W. Kett
   
Title: Chief Executive Officer and President















[Signature Page to Separation and Distribution Agreement]

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EXHIBIT C

Restricted Business

This Exhibit C to the Separation and Distribution Agreement, dated as of June 27, 2019 (the “ Agreement ”), made and entered into by and between KAR Auction Services, Inc., a Delaware corporation (“ KAR ”), and IAA, Inc., a Delaware corporation and wholly owned subsidiary of KAR (“ SpinCo ”) shall be read in conjunction with, and form an integral part of, the Agreement. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Agreement.

(a)          KAR’s and SpinCo’s auction businesses have operated as a unified part of KAR, and management, assets, intellectual property and know-how, customers, suppliers, and systems are shared between such businesses. As a result, the provisions of this Exhibit C are necessary to (i) allow each Party to operate its respective businesses effectively and competitively and (ii) protect each Party, in light of the substantial investment of time and financial resources in such businesses and each Party’s knowledge of the other Party’s customers, markets, strategy, technology, intellectual property and know-how, suppliers and personnel, against potential damage from the wrongful use of such knowledge.

(b)          The Parties hereby agree that from and after the Distribution Date for a period of five (5) years SpinCo shall not, and shall cause other members of the SpinCo Group and its and their Affiliates not to, directly or indirectly, engage in the Restricted Business (as defined herein) anywhere in [***]. “ Restricted Business ” shall include each of the following ( provided , however , that the Restricted Business shall exclude KAR’s salvage auction businesses as conducted immediately prior to the Distribution Date):

(i)          KAR’s businesses other than its salvage auction businesses as conducted immediately prior to the Distribution Date, including without limitation [***];

(ii)         operation of any electronic, mobile, mobile-app, digital or physical auction business selling whole car vehicles;

(iii)        [***];
(iv)        floorplan financing business (including, for the avoidance of doubt, all operations included under the AFC business segment, as disclosed in KAR’s Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019), including without limitation [***]; and

(v)         solicitation or provision of services to any original equipment manufacturer or original equipment manufacturer captive finance company by the SpinCo Group, except for services performed by the SpinCo Group with respect to the facilitation of loan pay-offs in connection with total loss transactions.

(c)          Notwithstanding the foregoing, none of the following shall constitute a breach of Section (b) of this Exhibit C (except to the extent set forth in the provisos to this Section (c) ):

(i)          acceptance of non-salvage vehicles that are charity donations by the SpinCo Group and sales of such vehicles by the SpinCo Group;

(ii)         purchases of non-salvage vehicles from the public by the SpinCo Group; provided that the average purchase price of such vehicles purchased in each Annual Period (as defined herein) is less than [***], and such purchases in each Annual Period represent less than [***] of the SpinCo Group’s consolidated annual sold volume for the applicable Annual Period ;

(iii)        sales of non-salvage vehicles by the SpinCo Group for: [***]

(iv)        sales by the SpinCo Group of non-salvage vehicles for [***] (for the avoidance of doubt, any sales pursuant to this clause (iv) shall not count toward the thresholds set forth in clause (iii) of this Section (c) );

(v)         purchase or ownership by the SpinCo Group of a Person or business that derives less than [***]% of its total annual revenues from Restricted Business, measured for the fiscal year ended immediately prior to the date of purchase or commencement of ownership (provided, however, that SpinCo Group may seek KAR’s prior written consent for a purchase or ownership greater than or equal to [***]%, which consent may not be unreasonably withheld);
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(vi)        direct or indirect ownership by the SpinCo Group of publicly traded interests in or securities of any Person engaged in Restricted Business, to the extent that such investment does not, directly or indirectly, confer on the SpinCo Group more than 5% of the voting power of such Person, or the investment in any fund in which the SpinCo Group has no discretion with respect to the investment strategy of such fund;

(vii)       any equity interest in any Person through any employment benefits plan of any member of the SpinCo Group; and

(viii)      purchases of vehicles by [***] in a manner consistent with purchases made by [***] immediately prior to the Distribution Date.

For purposes of this Section (c), “Annual Period” means each of the following: (1) annual period beginning on July 1, 2019 and ending on June 30, 2020; (2) annual period beginning on July 1, 2020 and ending on June 30, 2021; (3) annual period beginning on July 1, 2021 and ending on June 30, 2022; (4) annual period beginning on July 1, 2022 and ending on June 30, 2023; and (5) annual period beginning on July 1, 2023 and ending on June 30, 2024. [***].

(d)          Each party hereby agrees that from and after the Distribution Date for a period of twelve (12) months, such Party shall not hire or solicit for employment, or solicit and enter into any contractual arrangement for consulting or other professional services with, any individual who is a KAR Group Employee (as defined in the Employee Matters Agreement), in the case of SpinCo, or a SpinCo Group Employee (as defined in the Employee Matters Agreement), in the case of KAR; provided , however , that, without limiting the generality of the foregoing prohibition on soliciting and hiring  Employees (as defined in the Employee Matters Agreement) of the other Party, this Section (d) shall not prohibit (i) generalized solicitations that are not directed to specific Persons or Employees of the other Party, (ii) the solicitation and hiring of a Person whose employment was involuntarily terminated by the other Party, or (iii) the solicitation and hiring of a Person after receipt by the soliciting Party (in advance of any solicitation or, in the case of a response to a general solicitation as permitted under clause (i) above, in advance of any subsequent solicitation in connection with the recruiting process) of the express written consent of the senior Human Resources executive of the Party that employs the Person who is to be solicited and/or hired.  Except as provided in clause (ii) above, with respect to involuntary terminations, without regard to the use of the term “Employee” or “employs,” the restrictions under this Section (d) shall be applicable to (1) KAR Group Employees whose employment terminates sixty (60) days prior to the Distribution Date or after the Distribution Date, and (2) SpinCo Group Employees whose employment terminates sixty (60) days prior to the Distribution Date or after the Distribution Date, in each case,  until the date that is six months after such employee’s last date of employment with KAR or SpinCo, as applicable.

(e)          SpinCo shall, or shall cause another member of the SpinCo Group to, provide notice to all members of the SpinCo Group and its and their Affiliates of the agreements and covenants set forth in this Exhibit C , including SpinCo’s obligations and KAR’s enforcement rights.

(f)          From and after the Distribution Date, each member of the KAR Group shall be permitted to obtain from the SpinCo Group, and SpinCo shall cause each member of the SpinCo Group to cooperate to provide and deliver to KAR or the applicable member of the KAR Group, copies of all books, records and other Tangible Information to allow KAR to determine whether SpinCo or another member of the SpinCo Group has complied with its obligations under this Exhibit C , so long as KAR or another member of the KAR Group shall have provided no less than thirty (30) days prior written notice to SpinCo.
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(g)          [***].

(h)          If the final judgment of a court of competent jurisdiction declares any term or provision of this Exhibit C invalid or unenforceable, the Parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to and shall reform this Exhibit C to reduce the time, geographic area and/or scope of activity, to delete specific words or phrases, and/or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and the Agreement shall be enforceable as so modified.

(i)          Each Party acknowledges and agrees that the agreements and covenants set forth in this Exhibit C are (i) necessary to protect the legitimate business interests of the other Party, (ii) reasonable as to time, geographic area and scope of activity and do not impose a greater restraint on the activities of such Party than is reasonably necessary to protect such legitimate interests of the other Party, and (iii) reasonable in light of the consideration and other value provided, directly or indirectly, to such Party by the other Party pursuant to the Agreement and the Separation. Each Party hereby waives any and all rights to contest the validity of the agreements and covenants set forth in this Exhibit C on the ground of the reasonableness of the length of their term or the breadth of their geographic area or scope of activity.

(j)          Each Party acknowledges and agrees that (i) remedies at law, including monetary damages, would not be a sufficient remedy for any breach or threatened breach of the agreements and covenants set forth in this Exhibit C , (ii) the non-breaching Party would be irreparably harmed in the case of any such breach or threatened breach, and (iii) the non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief without proof of actual damages or posting of a bond as a remedy for any such breach or threatened breach.  Such remedies shall not be deemed to be the exclusive remedies for a breach or threatened breach of the agreements and covenants set forth in this Exhibit C but shall be in addition to all other remedies available at law or equity to the non-breaching Party. In any suit, action or claim to enforce the agreements and covenants set forth in this Exhibit C or for breach of the agreements and covenants set forth in this Exhibit C , the non-breaching party shall be entitled (for the avoidance of doubt, in addition to any remedies at law or equity) to recover its reasonable, out-of-pocket expenses, including reasonable attorneys’ fees. Notwithstanding the foregoing, all liabilities incurred in connection with the agreements and covenants set forth in this Exhibit C shall exclude indirect, consequential and punitive damages, except to the extent arising out of a willful and material breach of the agreements and covenants set forth in this Exhibit C .

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Exhibit 10.1

TRANSITIO N SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of June 27, 2019 (this “ Agreement ”), is made and entered into by and between KAR Auction Services, Inc., a Delaware corporation (“ KAR ”), and IAA, Inc., a Delaware corporation and wholly owned subsidiary of KAR (“ SpinCo ”, and together with KAR, the “ Parties ”).  For purposes of this Agreement, capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Separation and Distribution Agreement.

RECITALS:

WHEREAS, the board of directors of KAR (the “ KAR Board ”) has determined that it is advisable and in the best interests of KAR to separate KAR’s salvage auction businesses from its whole car auction businesses, creating two independent publicly traded companies;

WHEREAS, in furtherance of the foregoing, (a) KAR will cause the applicable members of the KAR Group to assign, transfer, convey and deliver to SpinCo or the applicable SpinCo Designee all right, title and interest of the KAR Group in and to the SpinCo Assets, (b) SpinCo and the applicable SpinCo Designees will accept, assume and agree faithfully to perform, discharge and fulfill the SpinCo Liabilities (the transactions described in clauses (a) and (b) herein being referred to collectively as the “ SpinCo Contribution ”), (c) SpinCo will cause the applicable members of the SpinCo Group to assign, transfer, convey and deliver to KAR or the applicable KAR Designee all right, title and interest of the SpinCo Group in and to the KAR Assets, and (d) KAR and the applicable KAR Designees will accept, assume and agree faithfully to perform, discharge and fulfill the KAR Liabilities (the transactions described in this recital, including the assignment, transfer, conveyance and delivery of the SpinCo Assets and KAR Assets, and the acceptance, assumption and agreement to perform the SpinCo Liabilities and the KAR Liabilities, being referred to collectively as the “ Separation ”);

WHEREAS, to effectuate the Separation and the Distribution, KAR and SpinCo have entered into a Separation and Distribution Agreement, dated as of June 27, 2019 (the “ Separation and Distribution Agreement ”); and

WHEREAS, to facilitate and provide for an orderly transition in connection with the Separation, the Parties desire to enter into this Agreement to set forth the terms pursuant to which each of the Parties shall provide Services to the other Party for a transitional period.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

SERVICES

Section 1.01           Services .

(a)          With respect to each applicable service set forth on Schedule 1 hereto (the “ Services ”), the Party identified on Schedule 1   hereto as the “ Provider ” of such Service agrees to provide, or to cause one or more members of its Group to provide, such Service to the other Party (the “ Recipient ”), or any members of the Recipient’s Group, in each case for the period commencing on the Effective Date and ending on the earlier of (i) the date that a Party terminates the provision of such Service pursuant to Section 4.02 and (ii) the date set forth on Schedule 1 with respect to such Service (the “ Service Period ”).

(b)          At any time during the term of this Agreement, either Party may request that the other Party provide or cause its Group to provide additional services hereunder (the “ Additional Services ”) by providing written notice of such request, it being understood that the Party that receives such request may in its sole discretion decline to provide such requested Additional Services. If a Provider agrees to undertake to provide the Additional Services, upon the mutual written agreement as to the nature, cost, duration and scope of such Additional Services, KAR and SpinCo shall supplement in writing the Services set forth on Schedule 1 to include such Additional Services. Except where the context otherwise indicates or requires, any such Additional Services specified on Schedule 1 or so agreed upon in writing by the Parties shall be deemed to be “ Services ” under this Agreement.

Section 1.02           Performance of Services .

(a)          Except for Services identified as a “New Service” in Schedule 1 hereto (“ New Services ”), which New Services the Provider shall use commercially reasonable efforts to provide, the Provider shall perform, or shall cause one or more members of its Group to perform, all Services to be provided by the Provider in a manner that is based on its past practice and that is substantially similar in all material respects to such Services (or analogous services) provided by or on behalf of KAR or any of its Subsidiaries with respect to the SpinCo Business or KAR Business, as applicable, during the twelve (12) months prior to the Effective Date (collectively referred to as the “ Level of Service ”).

(b)          Nothing in this Agreement shall require the Provider to perform or cause to be performed any Service to the extent that the manner of such performance would constitute a violation of any applicable Law or any existing contract or agreement with a Third Party. As between the Parties, the Provider shall be the party that determines, in its sole discretion,  whether to communicate with and shall be the party that communicates with Third Parties in connection with any necessary Third Party consents required under any existing contract or agreement with a Third Party to allow the Provider to perform, or cause to be performed, Services to be provided to the Recipient hereunder, with any such communications to be in the sole discretion of Provider. Unless otherwise agreed in writing by the Parties, all reasonable and documented out-of-pocket costs and expenses (if any) incurred by any Party or any member of its Group in connection with obtaining any Third Party consent that is required to allow the Provider to perform or cause to be performed any Services hereunder shall be paid for by the Recipient. If, with respect to a Service, a required Third Party consent has not been obtained, or the performance of a Service by or on behalf of the Provider would constitute a violation of any applicable Law, the Provider shall have no obligation to perform or cause to be performed such Service.
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(c)          Except for New Services, which New Services the Provider shall not be required to perform or cause to be performed other than in a manner that is commercially reasonable to Provider, the Provider shall not be obligated to perform or to cause to be performed any Service in a manner that is materially more burdensome (with respect to service quality, service quantity, or allocation of personnel or resources) than such services (or analogous services) provided by or on behalf of KAR or any of its Subsidiaries with respect to the SpinCo Business or KAR Business, as applicable, during the 12-month period prior to the Effective Date. Without limiting the generality of the foregoing, the Provider shall not be required to maintain the employment of any specific employee(s), hire additional employees or third-party service providers or purchase, or purchase, lease or license any additional equipment, software or other assets or properties in order the provide the Services hereunder. If the Recipient requests that the Provider perform or cause to be performed any Service in a manner that exceeds the Level of Service, then the Parties shall reasonably cooperate and act in good faith to determine whether the Provider will be required to provide such requested higher Level of Service. If the Parties determine that the Provider shall provide the requested higher Level of Service, then such higher Level of Service shall be documented in a written agreement signed by the Parties, which may be an amendment or addendum to this Agreement.

(d)          i)   Neither the Provider nor any member of its Group shall be required to perform or to cause to be performed any of the Services for the benefit of any Third Party or any other Person other than the Recipient and the members of its Group, and (ii) EXCEPT AS EXPRESSLY PROVIDED IN THIS Section 1.02 OR Section 6.04 , EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL SERVICES ARE PROVIDED ON AN “AS-IS” BASIS, THAT THE RECIPIENT ASSUMES ALL RISK AND LIABILITY ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES, AND THAT THE PROVIDER MAKES NO OTHER REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO THE SERVICES. EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
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(e)          Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement. No Party shall knowingly take any action in violation of any such applicable Law.

        Section 1.03          C harges for Services . The Recipient shall pay the Provider of the Services a fee for such Services (or category of Services, as applicable) (each fee constituting a “ Charge ” and, collectively, “ Charges ”), which Charges are set forth in Schedule 2 hereto. During the term of this Agreement, the amount of a Charge for any Service may be (a) decreased as determined in writing by the Provider in its sole discretion, and (b) increased to reflect any increase in the rates or charges imposed by any Third Party provider that is providing Services (proportional to the respective use of such Services by each Party) (“ Additional Charges ”). Together with any invoice for Charges, the Provider shall provide the Recipient with reasonable documentation, including any additional documentation reasonably requested by the Recipient to the extent that such documentation is in the Provider’s or its Group’s possession or control, to confirm the calculation of any applicable Additional Charges.

        Section 1.04          Changes in the Performance of Services . Subject to the performance Level of Service, the Provider may make changes from time to time in the manner of performing the Services if the Provider is making similar changes in performing analogous services for itself or its Group and if the Provider furnishes to the Recipient reasonable prior written notice of such changes. No such change shall materially adversely affect the timeliness or quality of the applicable Service.

        Section 1.05          Transitional Nature of Services . The Parties acknowledge the transitional nature of the Services and agree to reasonably cooperate and to use commercially reasonable efforts to effectuate a smooth transition of the Services from the Provider to the Recipient (or its designee).

        Section 1.06          Subcontracting . A Provider may hire or engage one or more Third Parties to perform any or all of its obligations under this Agreement; provided , however , that (a) such Provider shall use the same degree of care (but at least reasonable care) in selecting each such Third Party as it would if such Third Party was being retained to provide similar services to the Provider or its Group and (b) such Provider shall in all cases remain primarily responsible for all of its obligations under this Agreement with respect to the Services.
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ARTICLE II

OTHER ARRANGEMENTS

Section 2.01           Access .  The Recipient shall, and shall cause the members of its Group to, allow the Provider and the members of its Group and their respective Representatives reasonable access to the facilities of the Recipient and the members of its Group that is necessary for the Provider to fulfill its obligations under this Agreement. In addition to the foregoing right of access, the Recipient shall, and shall cause the members of its Group to, afford the Provider and the members of its Group and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and personnel of the Recipient and the members of its Group as reasonably necessary for the Provider to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by the Provider or the members of the Provider Group, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided that (i) such access shall not unreasonably interfere with any of the business or operations of the Recipient or any member of its Group and (ii) in the event that the Recipient determines that providing such access could be commercially detrimental, violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids such harm and consequence. The Provider agrees that all of its and its Group’s employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of the Recipient or a member of the Recipient’s Group, or when given access to any facilities, Information, systems, infrastructure or personnel of the Recipient or a member of the Recipient’s Group, conform to the policies and procedures of the Recipient and the members of the Recipient’s Group, as applicable, concerning health, safety, conduct and security which are made known or provided to the Provider from time to time.

Section 2.02          Audit Assistance .  Each of the Parties and the members of their respective Groups are or may be subject to regulation and audit by a Governmental Authority (including a Taxing Authority)  or parties to contracts with such Parties or the members of their Groups. If such a Third Party exercises its right to examine or audit such Party’s or a member of its Group’s books, records, documents or accounting practices and procedures pursuant to such applicable Law or contract provisions, and such examination or audit relates to the Services, then the other Party shall provide, at the sole cost and expense of the requesting Party (except if related to the Recipient's receipt of Services, in which case such cost and expense shall be the Recipient's responsibility), all assistance reasonably requested by the Party that is subject to the examination or audit in responding to such examination or audits or requests for Information, to the extent that such assistance or Information is within the reasonable control of the cooperating Party and is related to the Services.  The requesting Party shall consult and cooperate with the cooperating Party to limit the scope of any such examination or audit to the extent reasonably possible.
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Section 2.04          Title to Intellectual Property .  Except as otherwise expressly provided for under this Agreement, the Separation and Distribution Agreement, or another Ancillary Agreement, the Recipient acknowledges that it shall acquire no right, title or interest (including any license rights or rights of use) in any intellectual property which is owned or licensed by the Provider, by reason of the provision of the Services hereunder (other than the receipt and use of the Services by the Recipient during the term of this Agreement as contemplated hereunder). The Recipient shall not remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any intellectual property owned or licensed by the Provider, and the Recipient shall reproduce any such notices on any and all copies thereof. The Recipient shall not attempt to decompile, translate, reverse engineer or make excessive copies of any intellectual property owned or licensed by the Provider, and the Recipient shall promptly notify the Provider of any such attempt, regardless of whether by the Recipient or any Third Party, of which the Recipient becomes aware.

ARTICLE III

BILLING; TAXES

        Section 3.01          Procedure . Charges for the Services as well as any Covered Taxes due and owing in accordance with Section 3.03 hereof, shall be charged to and payable by the Recipient. Amounts payable pursuant to this Agreement shall be paid by wire transfer (or such other method of payment as may be agreed between the Parties from time to time) to the Provider (as directed by the Provider), on a monthly basis, which amounts shall be due within thirty (30) days after the Recipient’s receipt of each such invoice, including reasonable documentation pursuant to Section 1.03 . All amounts due and payable hereunder shall be invoiced and paid in U.S. dollars.

        Section 3.02          Late Payments .  Charges not paid when due pursuant to this Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of the receipt of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus one percent (1%) or the maximum rate under applicable Law, whichever is lower (the “ Interest Payment ”).

        Section 3.03          Taxes .

(a)          Without limiting any provisions of this Agreement, the Charges shall be exclusive of all sales, use, value-added, goods and services, services, excise, consumption, transfer or similar taxes, and any related penalties and interest, arising from the payment of such Charges to the Provider under this Agreement (other than any taxes measured by or imposed on the Provider’s gross or net income, or franchise or other similar taxes of the Provider) (“ Covered Taxes ”).
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(b)          The Recipient shall pay, or reimburse the Provider for, any and all Covered Taxes.

(c)          Where required by applicable Law, the Recipient shall pay any Covered Taxes directly to the relevant Governmental Authority in compliance with applicable Law. If any Covered Taxes are assessed on the receipt of Charges by the  Provider under this Agreement, the Provider shall notify the Recipient, pay such Covered Taxes directly to the applicable Governmental Authority and promptly provide the Recipient with an official receipt showing such payment, and the Recipient shall (without duplication) reimburse the Provider for such Covered Taxes.

(d)          In the event that applicable Law requires any Covered Taxes to be withheld from a payment of Charges by a Recipient to a Provider under this Agreement, the Recipient shall make such required withholding, pay such withheld amounts over to the applicable Governmental Authority in compliance with applicable Law, and increase the amount payable to the Provider as necessary so that, after the Recipient has withheld such amounts, the Provider receives an amount equal to the amount the Provider would have received had no such withholding been required.

(e)          The Recipient and the Provider shall use reasonable efforts, and shall cooperate with each other in good faith, to secure (and to enable the Recipient to claim) any exemption from, or otherwise to minimize, any Covered Taxes or to claim a tax refund therefor or tax credit in respect thereof, and the Recipient shall not be responsible for any Covered Taxes to the extent that such Covered Taxes would not have been imposed if (i) the Provider was eligible to claim an exemption from or reduction of such Covered Taxes, (ii) the Recipient used commercially reasonable efforts to notify the Provider of such eligibility reasonably in advance and (iii) the Provider failed to claim such exemption or reduction. If the Provider receives a refund with respect to any Covered Taxes paid or borne by the Recipient under this Agreement, the Provider shall promptly pay such refund to the Recipient net of costs and expenses (including any additional taxes) incurred by the Provider in connection with the receipt of such refund or the payment of such refund to the Recipient net of costs and expenses (including any additional taxes) incurred by the Provider in connection with the receipt of such refund or the payment of such refund to the Recipient.

        Section 3.04          No Set-Off .  Except as mutually agreed to in writing by KAR and SpinCo, no Party or any member of its Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or (b) any other amounts claimed to be owed to the other Party or any of member of its Group arising out of this Agreement.
7
ARTICLE IV

TERM AND TERMINATION

        Section 4.01          Term . This Agreement shall commence upon the Effective Date and shall terminate upon the earlier to occur of: (a) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Agreement; (b) the mutual written agreement of the Parties to terminate this Agreement in its entirety; and (c) 11:59 p.m., New York City time on June 27, 2021. Unless otherwise terminated pursuant to Section 4.02 , this Agreement shall terminate with respect to each Service as of the close of business on the last day of the Service Period for such Service.

Section 4.02           Early Termination .

(a)          Without prejudice to the Recipient’s rights with respect to Force Majeure, the Recipient may from time to time terminate this Agreement with respect to the entirety of any individual Service:

(i)          for any reason or no reason, at least thirty (30) days following written request to the Provider to terminate such Service, if the Provider agrees in writing to such termination; provided , however , that any such termination (x) may only be effective as of the date agreed to in writing by the Parties, (y) shall not result in a reduction of Charges with respect to calendar year 2019, and (z) shall result in a reduction of Charges following calendar year 2019 only if and to the extent expressly set forth in Schedule 2 ; or

(ii)          if the Provider of such Service has failed to perform any of its material obligations under this Agreement with respect to such Service, and such failure shall continue to be uncured for a period of  thirty (30) days (or ninety (90) days if Provider is using good-faith efforts to so cure during such thirty (30) day period and thereafter) after receipt by the Provider of written notice of such failure from the Recipient; provided , however , that any such termination may only be effective as of the last day of a month; provided , further , that the Recipient shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties (undertaken in accordance with the terms of Section 7.12 ) as to whether the Provider has cured the applicable breach.

(b)          The Provider may terminate this Agreement with respect to any individual Service, but not a portion thereof, at any time upon prior written notice to the Recipient if the Recipient has failed to perform any of its material obligations under this Agreement relating to such Service, including making payment of Charges for such Service when due, and such failure shall continue to be uncured for a period of thirty (30) days (or ninety (90) days if Recipient is using good-faith efforts to so cure during such thirty (30) day period and thereafter) after receipt by the Recipient of a written notice of such failure from the Provider; provided , however , that any such termination may only be effective as of the last day of a month; provided , further , that the Provider shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties (undertaken in accordance with the terms of Section 7.12 ) as to whether the Recipient has cured the applicable breach.
8
        Section 4.03          Interdependencies .  The Parties acknowledge and agree that: (a) there may be interdependencies among the Services being provided under this Agreement; (b) upon the request of either Party, the Parties shall cooperate and act in good faith to determine whether (i) any such interdependencies exist with respect to the particular Service that a Party is seeking to terminate pursuant to Section 4.02 and (ii) in the case of such termination, the Provider’s ability to provide a particular Service in accordance with this Agreement would be materially and adversely affected by such termination of another Service; and (c) in the event that the Parties have determined that such interdependencies exist (and, in the case of such termination that the Provider’s ability to provide a particular Service in accordance with this Agreement would be materially and adversely affected by such termination), the Parties shall negotiate in good faith to amend Schedule 1 with respect to such termination of such impacted Service, which amendment shall be consistent with the terms of comparable Services.  To the extent that the Provider’s ability to provide a Service is dependent on the continuation of a specified Service, the Provider’s obligation to provide such dependent Service shall terminate automatically with the termination of such supporting Service.

        Section 4.04          Effect of Termination .  Upon the termination of any Service pursuant to this Agreement, the Provider of the terminated Service shall have no further obligation to provide the terminated Service.

        Section 4.05          Information Transmission .  The Provider, on behalf of itself and the members of its Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the Recipient, in accordance with Section 6.1 of the Separation and Distribution Agreement, any Information received or computed by the Provider for the benefit of the Recipient concerning the relevant Service during the Service Period; provided , however , that, except as otherwise agreed to in writing by the Parties (a) the Provider shall not have any obligation to provide, or cause to be provided, Information in any nonstandard format, (b) the Provider and the members of its Group shall be reimbursed for their reasonable costs in accordance with Section 6.3 of the Separation and Distribution Agreement for creating, gathering, copying, transporting and otherwise providing such Information, and (c) the Provider shall use commercially reasonable efforts to maintain any such Information in accordance with Section 6.4 of the Separation and Distribution Agreement.
9
ARTICLE V

CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

        Section 5.01          KAR and SpinCo Obligations . Subject to Section 5.04 , until the five (5)-year anniversary of the Effective Date, each of KAR and SpinCo, on behalf of itself and each member of its Group, agrees to hold, and to cause its respective Representatives to hold, in confidence, with at least the same degree of care that applies to KAR’s proprietary and confidential Information pursuant to policies in effect as of the Effective Date, all proprietary or confidential Information concerning the other Party or the members of its Group or their respective businesses (“ Confidential Information ”) that is either in its possession (including Confidential Information in its possession prior to the Effective Date) or furnished by such other Party or such other Party’s Group members or their respective Representatives at any time pursuant to this Agreement, and shall not use any such Confidential Information other than for such purposes as may be expressly permitted hereunder, except, in each case, to the extent that such Confidential Information has been (a) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of its Group or any of their respective Representatives in violation of this Agreement; (b) later lawfully acquired from other sources by such Party or any of member of its Group, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such Confidential Information; or (c) independently developed or generated without reference to or use of the Confidential Information of the other Party or any member of its Group. If any Confidential Information of a Party or any member of its Group is disclosed to the other Party or any member of its Group in connection with providing the Services, then such disclosed Confidential Information shall be used only as required to perform such Services.

        Section 5.02          No Release; Return or Destruction .  Each Party agrees (a) not to release or disclose, or permit to be released or disclosed, any Confidential Information of the other Party addressed in Section 5.01 to any other Person, except its Representatives who need to know such Confidential Information in their capacities as such (whom shall be advised of their obligations hereunder with respect to such Confidential Information) and except in compliance with Section 5.04 , and (b) to use commercially reasonable efforts to maintain such Confidential Information in accordance with Section 6.4 of the Separation and Distribution Agreement. Without limiting the foregoing, when any such Confidential Information is no longer needed for the purposes contemplated by the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreements, each Party will promptly after request of the other Party either return to the other Party all such Confidential Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon).
10
        Section 5.03          Privacy and Data Protection Laws .  Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of the Services under this Agreement.

        Section 5.04          Protective Arrangements . In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any Confidential Information of the other Party pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide Confidential Information of the other Party (or any member of its Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such Information and shall reasonably cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such Information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide such Information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the Information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such Information was disclosed, in each case to the extent legally permitted.

ARTICLE VI

LIMITED LIABILITY AND INDEMNIFICATION

Section 6.01           Limitations on Liability .

(a)          THE LIABILITIES OF THE PROVIDER AND ITS GROUP MEMBERS AND THEIR RESPECTIVE REPRESENTATIVES, COLLECTIVELY, UNDER THIS AGREEMENT FOR ANY AND ALL ACTS OR FAILURES TO ACT IN CONNECTION HEREWITH (INCLUDING THE PERFORMANCE OR BREACH OF THIS AGREEMENT), OR FROM THE SALE, DELIVERY, PROVISION OR USE OF ANY AND ALL SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, SHALL NOT IN THE AGGREGATE EXCEED FIFTY (50%) PERCENT OF THE CHARGES PAID AND PAYABLE TO PROVIDER BY THE RECIPIENT PURSUANT TO THIS AGREEMENT.

(b)          IN NO EVENT SHALL EITHER PARTY, THE MEMBERS OF ITS GROUP OR THEIR RESPECTIVE REPRESENTATIVES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER PARTY IN CONNECTION WITH THE PERFORMANCE OF THIS AGREEMENT (OTHER THAN ANY SUCH LIABILITY TO THE EXTENT PAYABLE BY A PARTY OR A MEMBER OF ITS GROUP TO A THIRD PARTY WITH RESPECT TO A THIRD-PARTY CLAIM), AND EACH PARTY HEREBY WAIVES ON BEHALF OF ITSELF, THE MEMBERS OF ITS GROUP AND ITS REPRESENTATIVES ANY CLAIM FOR SUCH DAMAGES, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.
11
(c)          The limitations in Section 6.01(a) and Section 6.01(b) shall not apply in respect of any Liability to the extent arising out of or in connection with the gross negligence, willful misconduct or fraud of or by the Party (or a member of its Group) to be charged.

        Section 6.02          Obligation to Re-Perform .  In the event of any breach of this Agreement by the Provider with respect to the provision of any Services which the Provider can reasonably be expected to re-perform in a commercially reasonable manner, the Provider shall promptly correct in all material respects such error, defect or breach or re-perform in all material respects such Services at the request of the Recipient and at the sole cost and expense of the Provider. Any request for re-performance in accordance with this Section 6.02 by the Recipient must be in writing and specify in reasonable detail the particular error, defect or breach, and such request must be made no more than one month from the later of (x) the date on which such breach occurred and (y) the date on which such breach was reasonably discovered by the Recipient.

        Section 6.03          Recipient Indemnity . In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreement, but subject to the limitations set forth in Section 6.01 of this Agreement, the Recipient shall indemnify, defend and hold harmless the Provider, the members of the Provider’s Group and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Provider Indemnitees ”), from and against any and all claims of Third Parties to the extent relating to, arising out of or resulting from the Provider’s furnishing or failing to furnish the Services provided for in this Agreement, other than Third Party Claims to the extent arising out of the gross negligence, willful misconduct or fraud of Provider or a member of Provider’s Group.

        Section 6.04          Provider Indemnity .  In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreement, but subject to the limitations set forth in Section 6.01 of this Agreement, the Provider shall indemnify, defend and hold harmless the Recipient, the members of the Recipient’s Group and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Recipient Indemnitees ”), from and against any and all Liabilities to the extent relating to, arising out of or resulting from the sale, delivery, provision or use of any Services provided by such Provider hereunder, but only to the extent that such Liability relates to, arises out of or results from the gross negligence, willful misconduct or fraud of Provider or a member of Provider’s Group.
12
        Section 6.05          Indemnification Procedures .  The procedures for indemnification set forth in Sections 4.4, 4.5 and 4.6 of the Separation and Distribution Agreement shall govern claims for indemnification under this Agreement, mutatis   mutandis .

ARTICLE VII

MISCELLANEOUS

        Section 7.01          Independent Contractors .  The Parties each acknowledge and agree that they are separate entities, each of which has entered into this Agreement for independent business reasons. The relationships of the Parties hereunder are those of independent contractors and nothing contained herein shall be deemed to create a joint venture, partnership or any other relationship between the Parties or the respective members of its Group. Employees performing Services hereunder do so on behalf of, under the direction of, and as employees of, the Provider, and the Recipient shall have no right, power or authority to direct such employees.

Section 7.02           Counterparts; Entire Agreement; Corporate Power .

(a)          This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b)          This Agreement, the Separation and Distribution Agreement and the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c)          KAR represents on behalf of itself and, to the extent applicable, each of the members of the KAR Group, and SpinCo represents on behalf of itself and, to the extent applicable, each of the members of the SpinCo Group, as follows:

(i)          each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and
13
(ii)          this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.

(d)          Each Party acknowledges and agrees that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms each such stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

        Section 7.03          Governing Law .  This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of Laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

        Section 7.04          Assignability .  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , however , that SpinCo may not assign its rights or obligations under this Agreement without the express prior written consent of KAR, which consent shall not be unreasonably withheld, conditioned or delayed.

        Section 7.05          Third-Party Beneficiaries .  Except as provided in Article VI with respect to the Provider Indemnitees and Recipient Indemnitees in their capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder; and (b) there are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

        Section 7.06          Notices .  All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, , by electronic mail (for which a confirmation email is obtained), or sent by overnight courier (providing proof of delivery) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section):
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If to KAR, to:
     
   
KAR Auction Services, Inc.
   
13085 Hamilton Crossing Boulevard
   
Carmel, Indiana 46032
   
Email:
becca.polak@karauctionservices.com
   
Attention:
Chief Legal Officer
       
 
If to SpinCo, to:
     
   
Insurance Auto Auctions, Inc.
   
Two Westbrook Corporate Center, Suite 500
   
Westchester, Illinois 60154
   
Email:
jkett@iaai.com
      skerley@iaai.com
   
Attention:
John Kett
      Sidney Peryar

A Party may, by notice to the other Party, change the address to which such notices are to be given.

        Section 7.07          Severability .  If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

        Section 7.08          Force Majeure.   No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance (other than a payment obligation hereunder) shall be extended for a period equal to the time lost by reason of the delay unless this Agreement has previously been terminated under Article IV or under this Section 7.08 . A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable (and in no event later than the date that the affected Party resumes providing analogous services to, or otherwise resumes analogous performance under any other agreement for, itself, its Affiliates or any Third Party) unless this Agreement has previously been terminated under Article IV or this Section 7.08 .
15
        Section 7.09          Headings .  The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

        Section 7.10          Survival of Covenants .  Except as expressly set forth in this Agreement, the covenants, representations and warranties contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Effective Date and shall remain in full force and effect thereafter.

        Section 7.11          Waivers of Default . Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

        Section 7.12          Dispute Resolution .  In the event of any controversy, dispute or claim (a “ Dispute ”) arising out of or relating to any Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise), calculation or allocation of the costs of any Service or otherwise arising out of or relating in any way to this Agreement (including the interpretation or validity of this Agreement), such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article VII of the Separation and Distribution Agreement.

        Section 7.13          Amendments . No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

        Section 7.14          Interpretation .  In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Annexes and Exhibits hereto) and not to any particular provision of this Agreement; (c) Article, Section, Exhibit, Annex and Schedule references are to the Articles, Sections, Exhibits, Annexes and Schedules to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or New York, New York; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to June 27, 2019.
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        Section 7.15          Mutual Drafting .  This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.

[Signature page follows]
17
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

      
KAR AUCTION SERVICES, INC.
     

           
         
    
By:
/s/ Eric M. Loughmiller
      
       
Name: Eric M. Loughmiller
      
       
Title: Executive Vice President and Chief Financial Officer
        
        
        
       
IAA, INC.
        
       
       
       
By:
/s/ John W. Kett
        
       
Name: John W. Kett
      
        
Title: Chief Executive Officer and President
      
        
         

[Signature Page to Transition Services Agreement]

Exhibit 10.2

TAX M ATTERS AGREEMENT

by and between

KAR AUCTION SERVICES, INC.

and

IAA, INC.

Dated as of June 27, 2019



TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

Section 1.1
General
2
     
ARTICLE II
     
CERTAIN ALLOCATIONS
     
Section 2.1
General Rule
9
Section 2.2
Federal Income Tax Relating to Joint Returns
10
Section 2.3
Federal Income Tax Relating to Separate Returns
10
Section 2.4
State Tax Relating to Joint Returns
10
Section 2.5
State Tax Relating to Separate Returns
11
Section 2.6
Non-U.S. Tax Relating to Joint Returns
11
Section 2.7
Non-U.S. Tax Relating to Separate Returns
11
Section 2.8
Non-Income Taxes
11
Section 2.9
Internal Restructuring Taxes.
12
Section 2.10
Separation Taxes
12
Section 2.11
Determination of Tax Attributable to a Particular Entity
12
Section 2.12
Allocation of Employment Taxes and Equity Award Deductions
13
Section 2.13
Estimated Taxes.
13
Section 2.14
Transaction-Related Losses
13
Section 2.15
Straddle Periods
13
Section 2.16
Tax Refunds
13
Section 2.17
Prior Agreements
14
     
ARTICLE III
     
PREPARATION AND FILING OF TAX RETURNS
     
Section 3.1
KAR’ Responsibility
14
Section 3.2
Spinco’s Responsibility
14
Section 3.3
Right To Review Tax Returns
14
Section 3.4
Cooperation
15
Section 3.5
Tax Reporting Practices
15
Section 3.6
Reporting of Transactions
15
Section 3.7
Payment of Taxes
17
Section 3.8
Amended Returns and Carrybacks
18
Section 3.9
Tax Benefits
18
Section 3.10
Tax Attributes
18


     
ARTICLE IV
     
TAX-FREE STATUS OF THE DISTRIBUTION
     
Section 4.1
Representations and Warranties
19
Section 4.2
Restrictions on KAR
20
Section 4.3
Restrictions on Spinco
20
     
ARTICLE V
     
INDEMNITY OBLIGATIONS
     
Section 5.1
Indemnity Obligations
22
Section 5.2
Indemnification Payments
23
Section 5.3
Payment Mechanics
23
Section 5.4
Treatment of Payments
24
     
ARTICLE VI
     
TAX CONTESTS
     
Section 6.1
Notice
24
Section 6.2
Separate Returns
24
Section 6.3
Joint Returns
24
Section 6.4
Other Tax Contests
25
Section 6.5
Obligation of Continued Notice
25
Section 6.6
Settlement Rights
25
Section 6.7
Tax Contest Costs and Expenses.
26
     
ARTICLE VII
     
COOPERATION
     
Section 7.1
General
26
Section 7.2
Consistent Treatment
27
     
ARTICLE VIII
     
RETENTION OF RECORDS; ACCESS
     
Section 8.1
Retention of Records
27
Section 8.2
Access to Tax Records
27
     
ARTICLE IX
     
DISPUTE RESOLUTION
     
Section 9.1
Dispute Resolution Mechanics
28
     

ii

ARTICLE X
     
MISCELLANEOUS PROVISIONS
     
Section 10.1
Conflicting Agreements
28
Section 10.2
Termination
28
Section 10.3
Interest on Late Payments
28
Section 10.4
Specific Performance
28
Section 10.5
Successors
29
Section 10.6
Application to Present and Future Subsidiaries
29
Section 10.7
Assignability
29
Section 10.8
No Fiduciary Relationship
29
Section 10.9
No Duplication; No Double Recovery.
29
Section 10.10
Further Assurances
29
Section 10.11
Survival
30
Section 10.12
Notices
30
Section 10.13
Effective Date
31
     
  EXHIBITS 
 
Exhibit A
Separation Plan
 


         




iii
TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “ Agreement ”), is entered into as of June 27, 2019, between KAR Auction Services, Inc. (“ KAR ”), a Delaware corporation, and IAA, Inc. (“ Spinco ” and, together with KAR, the “ Parties ”), a Delaware corporation and a wholly owned subsidiary of KAR.  Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to such terms in the Separation and Distribution Agreement, dated as of the date hereof, between the Parties (the “ Separation and Distribution Agreement ”).

R E C I T A L S

WHEREAS, the board of directors of KAR (the “ Board ”) has determined that it is in the best interests of KAR and its stockholders to separate KAR into two separate, publicly traded companies, one for each of (i) the KAR Business, which shall be owned and conducted, directly or indirectly, by KAR and its Subsidiaries and (ii) the Spinco Business, which shall be owned and conducted, directly or indirectly, by Spinco and its Subsidiaries;

WHEREAS, in order to effect the Separation, the Board has determined that it is appropriate, desirable and in the best interests of KAR and its stockholders for KAR to undertake the Internal Restructuring and, in connection therewith, effect the Spinco Contribution which, in exchange therefor, Spinco shall: (i) issue to KAR the Spinco Shares and (ii) distribute to KAR the Cash Distribution;

WHEREAS, following the completion of the Internal Restructuring and the Separation, KAR shall distribute all of the issued and outstanding Spinco Shares to holders of the KAR Shares on the Record Date, on a pro rata basis and shall transfer the Cash Distribution to certain of its creditors (the “ Distribution ” and, together with the Internal Restructuring and the Separation, the “ Transactions ”);

WHEREAS, Spinco has been incorporated for these purposes and has not engaged in activities except those incidental to its formation and in preparation for the Transactions;

WHEREAS, as of the date hereof, KAR is the common parent of an affiliated group of domestic corporations that has elected to file consolidated U.S. federal income Tax Returns and, as a result of the Distribution, neither Spinco nor any of its Affiliates will be a member of such group after the close of the Distribution Date;

WHEREAS, for U.S. federal income tax purposes, it is the intention of the Parties that the Separation and the Distribution, taken together, will qualify as a transaction that will qualify under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

 WHEREAS, KAR has received the IRS Ruling and the Canadian Tax Ruling; and

WHEREAS, the Parties desire to (a) provide for the payment of Tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of Tax Returns, and provide for certain other matters relating to Taxes and (b) set forth certain covenants and indemnities relating to the preservation of the Intended Tax Treatment of the Transactions.
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NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

              Section 1.1   General . As used in this Agreement, the following terms shall have the following meanings:

“ Adjustment ” shall mean an adjustment of any item of income, gain, loss, deduction, credit or any other item affecting Taxes of a taxpayer pursuant to a Final Determination.

“ Affiliate ” shall mean, with respect to a Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person. For this purpose, “control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“ Agreement ” shall have the meaning set forth in the preamble hereto.

“ Canadian Spinco ” shall mean 1206397 B.C. Unlimited Liability Company, an unlimited liability company incorporated under the laws of the Province of British Columbia.

“ Canadian Tax Ruling ” shall mean an advance income tax ruling from the Canada Revenue Agency addressing the tax Canadian tax consequences of certain aspects of the Transactions.

“ Canadian Tax Ruling Request ” shall mean any letter filed by KAR with the Canada Revenue Agency requesting an advance income tax ruling regarding certain Canadian tax consequences of the Transactions and any amendment or supplement to such Canadian Tax Ruling Request letter.

“ Controlling Party ” shall mean, with respect to a Tax Contest, the Party entitled to control such Tax Contest pursuant to Section 6.2 , Section 6.3 or Section 6.4 of this Agreement.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Dispute ” shall have the meaning set forth in Section 9.1 of this Agreement.

“ Dispute Date ” shall have the meaning set forth in Section 9.1 of this Agreement.

“ Distribution ” shall have the meaning set forth in the recitals.
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“ Distribution Date ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Employee Matters Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Employment Taxes ” shall mean those Liabilities (as defined in the Separation and Distribution Agreement) for Taxes which are allocable pursuant to the provisions of the Employee Matters Agreement.

“ Equity Award Deduction ” shall have the meaning set forth in the Employee Matters Agreement.

“ Federal Income Tax ” shall mean any Tax imposed by Subtitle A of the Code other than an Employment Tax.

“ Final Determination ” shall mean the final resolution of liability for any Tax for any taxable period, by or as a result of (a) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no longer be appealed, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of other jurisdictions, which resolves the entire Tax liability for any taxable period, (c) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund or credit may be recovered by the jurisdiction imposing the Tax, or (d) any other final resolution, including by reason of the expiration of the applicable statute of limitations or the execution of a pre-filing agreement with the IRS or other Taxing Authority.

“ Group ” shall mean either the Spinco Group or the KAR Group, as the context requires.

“ Income Tax ” shall mean any federal, state, local or Non-U.S. Tax determined by reference to income, gains, net worth, gross receipts, or any Taxes imposed in lieu of such a Tax.

“ Incremental Section 336(e) Tax ” shall mean the amount of Taxes, if any, incurred by KAR as a result of making a Section 336(e) Election in excess of the amount of Taxes that would have been incurred by KAR had no such Section 336(e) Election been made and the Distribution had been treated as a taxable stock distribution for U.S. federal income tax purposes.

“ Indemnifying Party ” shall have the meaning set forth in Section 5.2 of this Agreement.

“ Indemnitee ” shall have the meaning set forth in Section 5.2 of this Agreement.

“ Intended Tax Treatment ” shall mean the qualification of the Transactions for the intended tax treatment, including as set forth in the IRS Ruling, Canadian Tax Ruling, any Tax Opinion or the Separation Plan.
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“ Internal Restructuring ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Internal Restructuring Taxes ” shall mean those Taxes triggered by, or arising or otherwise incurred as a result of, the Internal Restructuring, except for (i) any Tax resulting from a breach by any Party of any covenant in this Agreement, and (ii) any Tax attributable to any action set out in Section 4.2 or Section 4.3 .

“ IRS ” shall mean the United States Internal Revenue Service.

“ IRS Ruling ” shall mean a private letter ruling from the IRS addressing the tax consequences of certain aspects of the Transactions.

“ IRS Ruling Request ” shall mean any letter filed by KAR with the IRS requesting a ruling regarding certain tax consequences of the Transactions and any amendment or supplement to such IRS Ruling Request letter.

“ Joint Return ” shall mean (i) any Tax Return that actually includes, by election or otherwise, one or more members of the KAR Group together with one or more members of the Spinco Group or (ii) any Tax Return that includes Tax Items attributable to both the KAR Business and the Spinco Business.

“ KAR ” shall have the meaning set forth in the preamble hereto.

“ KAR Affiliated Group ” shall mean an affiliated group (as that term is defined in Section 1504 of the Code and the Treasury Regulations thereunder) of which KAR is the common parent.

“ KAR Business ” shall have the meaning set forth in the Separation  and Distribution Agreement.

“ KAR Federal Consolidated Income Tax Return ” shall mean any United States federal consolidated income Tax Return for a KAR Affiliated Group.

“ KAR Group ” shall mean KAR and each Person that is a Subsidiary of KAR (other than Spinco and any other member of the Spinco Group).

“ KAR Separate Return ” shall mean any Tax Return of or including any member of the KAR Group (including any consolidated, combined or unitary return) that does not include any member of the Spinco Group.

“ KAR Shares ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Law ” shall have the meaning set forth in the Separation and Distribution Agreement.
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“ Non-Controlling Party ” shall mean, with respect to a Tax Contest, the Party that is not entitled to control such Tax Contest pursuant to Section 6.2 ,  Section 6.3 or Section 6.4 of this Agreement.

“ Non-Income Tax ” shall mean any Tax that is not an Income Tax.

“ Non-U.S. Tax ” shall mean any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or United States possession.

“ Parties ” shall mean the parties to this Agreement.

“ Past Practices ” shall have the meaning set forth in Section 3.5 of this Agreement.

“ Person ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Post-Distribution Period ” shall mean any taxable period (or portion thereof) beginning after the Distribution Date, including for the avoidance of doubt, the portion of any Straddle Period beginning after the Distribution Date.

“ Pre-Distribution Period ” shall mean any taxable period (or portion thereof) ending on or before the Distribution Date, including for the avoidance of doubt, the portion of any Straddle Period ending at the end of the day on the Distribution Date.

“ Preparing Party ” shall mean, with respect to a Tax Return, the Party that is required to prepare and file any such Tax Return pursuant to Section 3.1 or Section 3.2 of this Agreement, as applicable.

“ Proposed Acquisition Transaction ” shall mean a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other Treasury Regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by Spinco management or shareholders, is a hostile acquisition, or otherwise, as a result of which Spinco (or any successor thereto) would merge or consolidate with any other Person or as a result of which one or more Persons would (directly or indirectly) acquire, or have the right to acquire, from Spinco (or any successor thereto) and/or one or more holders of Spinco Shares, respectively, any amount of stock of Spinco, that would, when combined with any other direct or indirect changes in ownership of the stock of Spinco pertinent for purposes of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, comprise forty (40) percent or more of (i) the value of all outstanding shares of Spinco as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the total combined voting power of all outstanding shares of voting stock of Spinco as of the date of the such transaction, or in the case of a series of transactions, the date of the last transaction of such series.  Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by Spinco of a shareholder rights plan or (ii) issuances by Spinco that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d).  For purposes of determining whether a transaction constitutes an indirect acquisition, (i) any recapitalization or other transaction resulting in a shift of voting power shall be treated as an indirect acquisition of shares of stock by the shareholders experiencing an increase in voting power as a result of such recapitalization or other transaction and (ii) any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and the Treasury Regulations promulgated thereunder and shall be interpreted accordingly. Any clarification of, or change in, the statute or Treasury Regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.
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“ Protective Section 336(e) Election ” shall have the meaning set forth in Section 3.6(b) of this Agreement.

“ Reasonable Basis ” shall mean reasonable basis within the meaning of Section 6662(d)(2)(B)(ii)(II) of the Code and the Treasury Regulations promulgated thereunder (or such other level of confidence required by the Code at that time to avoid the imposition of penalties).

“ Record Date ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Refund ” shall mean any refund, reimbursement, offset, credit, or other similar benefit in respect of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied against other Taxes payable), including any interest paid on or with respect to such refund of Taxes; provided , however , that the amount of any refund of Taxes shall be net of any Taxes imposed by any Taxing Authority on, related to, or attributable to, the receipt of or accrual of such refund, including any Taxes imposed by way of withholding or offset.

“ Restricted Period ” shall mean the period which begins with the Distribution Date and ends two (2) years thereafter.

“ Reviewing Party ” shall mean, with respect to a Tax Return, the Party that is not the Preparing Party.

“ Section 336(e) Allocation Statement ” shall have the meaning set forth in Section 3.6(b) of this Agreement.

“ Section 336(e) Benefit Amount ” shall have the meaning set forth in Section 3.6(b) of this Agreement.

“ Section 336(e) Tax Basis Increase ” shall have the meaning set forth in Section 3.6(b) of this Agreement.

“ Separate Return ” shall mean a KAR Separate Return or an Spinco Separate Return, as the case may be.

“ Separation ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Separation and Distribution Agreement ” shall have the meaning set forth in the preamble hereto.
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“ Separation Plan ” shall mean the step plan attached hereto as Exhibit A .

“ Separation Taxes ” shall mean those Taxes triggered by, or arising or otherwise incurred as a result of, the Transactions, except for (i) any Tax resulting from a breach by any Party of any covenant in this Agreement, (ii) any Internal Restructuring Taxes and (iii) any Tax attributable to any action set out in Section 4.2 or Section 4.3 .

“ Spinco Actual Estimated Tax Liability ” shall mean the actual amount of Taxes shown as due and payable after the Distribution, as determined by Past Practices, with respect to which any Spinco Estimated Tax Amount was paid by Spinco to KAR.

“ Spinco Business ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Spinco Contribution ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Spinco’s Direct Subsidiary ” shall mean IAA Holdings, Inc., a Delaware corporation.

“ Spinco Estimated Tax Amount ” shall mean the amount of estimated Taxes paid by Spinco to KAR with respect to Taxes not yet due and payable prior to the Distribution that would be included on any (i) U.S. consolidated Federal Income Tax Return of KAR or (ii) unitary, combined or other consolidated State Tax Return of KAR, in each case, that are attributable to the Spinco Business or any member of the Spinco Group for a Pre-Distribution Period, as determined by Past Practices.

“ Spinco Group ” shall mean Spinco and each Person that will be a Subsidiary of Spinco as of immediately after the Effective Time.

“ Spinco Separate Return ” shall mean any Tax Return of or including any member of the Spinco Group (including any consolidated, combined or unitary return) that does not include any member of the KAR Group.

“ Spinco Shares ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ State Tax ” means any Tax imposed by any State of the United States or by any political subdivision of any such State, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

“ Straddle Period ” shall mean any taxable year or other taxable period that begins on or before the Distribution Date and ends after the Distribution Date.

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“ Subsidiary ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Tax ” or “ Taxes ” shall mean (i) all taxes, charges, fees, duties, levies, imposts, rates or other assessments or governmental charges of any kind imposed by any U.S. federal, state, local or non-U.S. Taxing Authority, including, without limitation, income, gross receipts, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, custom duties, property, sales, use, license, capital stock, transfer, franchise, registration, payroll, withholding, social security, unemployment, disability, value added, alternative or add-on minimum or other taxes, whether disputed or not, and including any interest, penalties, charges or additions attributable thereto, (ii) liability for the payment of any amount of the type described in clause (i) above arising as a result of being (or having been) a member of any group or being (or having been) included or required to be included in any Tax Return related thereto, and (iii) liability for the payment of any amount of the type described in clauses (i) or (ii) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person.

“ Tax Attribute ” shall mean net operating losses; capital losses; research and development deductions, credits and carryovers; general business credits and carryovers; investment tax credit carryovers; earnings and profits; foreign tax credit carryovers; overall foreign losses; previously taxed income; separate limitation losses; and any other losses, deductions, credits or other comparable items that could affect a Tax liability for a past or future taxable period.

“ Taxing Authority ” shall mean any Taxing Authority or any subdivision, agency, commission or entity thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

“ Tax Certificates ” shall mean any certificates of officers of KAR and Spinco, provided to PricewaterhouseCoopers, Skadden, Arps, Slate, Meagher & Flom LLP, or any other law or accounting firm in connection with any Tax Opinion, the IRS Ruling or the Canadian Tax Ruling.

“ Tax Contest ” shall have the meaning set forth in Section 6.1 of this Agreement.

“ Tax Expert ” shall mean independent Tax counsel of recognized national standing or a nationally recognized independent public accounting firm, in either case, with experience in the tax area(s) involved or at issue.

“ Tax Item ” shall mean any item of income, gain, loss, deduction, or credit.

“ Tax Law ” shall mean the law of any Taxing Authority or political subdivision thereof relating to any Tax.

“ Tax Materials ” shall have the meaning set forth in Section 4.1(a) of this Agreement.
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“ Tax Opinion ” shall mean any written opinion of PricewaterhouseCoopers, Skadden, Arps, Slate, Meagher & Flom LLP or any other law or accounting firm, regarding certain tax consequences of certain transactions executed as part of the Transactions.

“ Tax Records ” shall have the meaning set forth in Section 8.1 of this Agreement.

“ Tax-Related Losses ” shall mean (i) all Taxes (including interest and penalties thereon) imposed pursuant to any settlement, Final Determination, judgment or otherwise, (ii) all accounting, legal and other professional fees, and court costs incurred in connection with Taxes or Tax Contests, as well as any other out-of-pocket costs incurred in connection with Taxes or Tax Contests; and (iii) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by KAR (or any of its Affiliates) or Spinco (or any of its Affiliates) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Taxing Authority, in each case, resulting from the failure of any transaction to have the Intended Tax Treatment.

“ Tax Return ” shall mean any return, report, certificate, election, form or similar statement or document (including any related supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) supplied to or filed with, or required to be supplied to or filed with, a Taxing Authority, or any bill for or notice related to ad valorem or other similar Taxes received from a Taxing Authority, in each case, in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

“ Transactions ” shall have the meaning set forth in the recitals.

“ Treasury Regulations ” shall mean the regulations promulgated from time to time under the Code as in effect for the relevant tax period.

“ Unqualified Tax Opinion ” shall mean a “will” opinion, without substantive qualifications, of a nationally recognized law or accounting firm, to the effect that a transaction will not affect the Intended Tax Treatment of the Transactions.  Any such opinion must assume that the Transactions would have qualified for the Intended Tax Treatment if the transaction in question did not occur.

ARTICLE II

CERTAIN ALLOCATIONS

                Section 2.1 General Rule .

(a)            Spinco Liability . Spinco shall be liable for, and shall indemnify and hold harmless the KAR Group from and against any liability for, Taxes which are allocated to Spinco under this Agreement.
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(b)            KAR Liability .  KAR shall be liable for, and shall indemnify and hold harmless the Spinco Group from and against any liability for, Taxes which are allocated to KAR under this Agreement.

                Section 2.2   Federal Income Tax Relating to Joint Returns .

(a)            Spinco shall pay and be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) which Taxes are attributable to the Spinco Business for all Pre-Distribution Periods.

(b)            KAR shall pay and be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) other than those Federal Income Taxes described in Section 2.2(a) for all Pre-Distribution Periods.

                Section 2.3   Federal Income Tax Relating to Separate Returns .

(a)            Spinco shall pay and be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Spinco Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

(b)            KAR shall pay and be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any KAR Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

                Section 2.4   State Tax Relating to Joint Returns .

(a)            Spinco shall pay and be responsible for any and all State Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) which Taxes are attributable to the Spinco Business for all Pre-Distribution Periods.

(b)            KAR shall pay and be responsible for any and all State Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) other than those State Taxes described in Section 2.4(a) for all Pre-Distribution Periods.

(c)            Spinco shall pay and be responsible for any and all State Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) which Taxes are attributable to the Spinco Business for all Post-Distribution Periods.

(d)            KAR shall pay and be responsible for any and all State Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) other than those State Taxes described in Section 2.4(c) for all Post-Distribution Periods.
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                Section 2.5   State Tax Relating to Separate Returns .

(a)            Spinco shall pay and be responsible for any and all State Taxes due with respect to or required to be reported on any Spinco Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

(b)            KAR shall pay and be responsible for any and all State Taxes due with respect to or required to be reported on any KAR Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

                Section 2.6   Non-U.S. Tax Relating to Joint Returns .

(a)            Spinco shall pay and be responsible for any and all Non-U.S. Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) which Taxes are attributable to the Spinco Business for all Pre-Distribution Periods.

(b)            KAR shall pay and be responsible for any and all Non-U.S. Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) other than those Non-U.S. Taxes described in Section 2.6(a) for all Pre-Distribution Periods.

(c)            Spinco shall pay and be responsible for any and all Non-U.S. Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) which Taxes are attributable to Spinco Business for all Post-Distribution Periods.

(d)            KAR shall pay and be responsible for any and all Non-U.S. Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) other than those Non-U.S. Taxes described in Section 2.6(c) for all Post-Distribution Periods.

                Section 2.7   Non-U.S. Tax Relating to Separate Returns .

(a)            Spinco shall pay and be responsible for any and all Non-U.S. Taxes due with respect to or required to be reported on any Spinco Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

(b)            KAR shall pay and be responsible for any and all Non-U.S. Taxes due with respect to or required to be reported on any KAR Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

                Section 2.8   Non-Income Taxes .

To the extent not otherwise allocated under this Article II , Non-Income Taxes shall be allocated as follows:
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(a)            Spinco shall pay and be responsible for any and all Non-Income Taxes that are attributable to the Spinco Business for all Pre-Distribution Periods.

(b)            KAR shall pay and be responsible for any and all Non-Income Taxes other than those Non-Income Taxes described in Section 2.8(a) for all Pre-Distribution Periods.

(c)            Spinco shall pay and be responsible for any and all Non-Income Taxes that are imposed on or attributable to the Spinco Business or Spinco Group for all Post-Distribution Periods.

(d)            KAR shall pay and be responsible for any and all Non-Income Taxes that are imposed on or attributable to the KAR Business or KAR Group for all Post-Distribution Periods.

                Section 2.9   Internal Restructuring Taxes . Notwithstanding anything in this Agreement to the contrary, Spinco shall pay and be responsible for any and all Internal Restructuring Taxes.

                Section 2.10     Separation Taxes . Notwithstanding anything in this Agreement to the contrary, each of KAR and Spinco shall pay and be responsible for fifty (50) percent of any and all Separation Taxes.

                Section 2.11     Determination of Tax Attributable to a Particular Entity .

(a)            For purposes of this Agreement, the amount of Taxes attributable to a particular entity shall be determined by KAR in a manner consistent with the Past Practices of the KAR Group with respect to the relevant Tax Return (including any past accounting methods, elections and conventions).  Without limiting the generality of the foregoing, the following principles shall apply for purposes of determining the amount of Tax attributable to a particular entity:

(i)            including only Tax Items of the relevant entity that were included in the relevant Tax Return (i.e., as though the relevant entity prepared such Tax Return on a stand-alone basis);

(ii)            except as provided in Section 2.11(a)(iv) hereof, using all elections, accounting methods and conventions used on the relevant Tax Return for such period;

(iii)            applying the highest statutory marginal corporate income Tax rate in effect for such taxable period;

(iv)            assuming that the relevant entity elects not to carry back any net operating losses.

(b)            In the event a Non-Income Tax is attributable or traceable to a specific asset, then such Tax shall be attributable to the entity that owns the relevant asset.
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                Section 2.12     Allocation of Employment Taxes and Equity Award Deductions . Liability for Employment Taxes and the allocation or apportionment of Equity Award Deductions shall be governed by the Employee Matters Agreement.

Section 2.13      Estimated Taxes .

(a)            With respect to any Spinco Estimated Tax Amount that Spinco has paid to KAR:

(i)            If the Spinco Estimated Tax Amount is less than the Spinco Actual Estimated Tax Liability, Spinco shall pay KAR the amount of such excess pursuant to the terms of Section 3.7 (b); and

(ii)            If the Spinco Estimated Tax Amount is greater than the Spinco Actual Estimated Tax Liability, KAR shall pay to Spinco the amount of such excess no later than fifteen (15) Business Days after the due date (taking into account any applicable extensions) for the Tax Return with respect to which the Spinco Actual Estimated Tax Liability pertains.

                Section 2.14     Transaction-Related Losses .

Notwithstanding anything in this Agreement to the contrary:

(a)            Spinco shall be responsible for (i) any and all Tax-Related Losses for which Spinco is responsible pursuant to Section 5.1(b) of this Agreement and (ii) any and all Tax-Related Losses arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant, or obligation of any member of the Spinco Group pursuant to this Agreement.

(b)            KAR shall be responsible for (i) any and all Tax-Related Losses for which KAR is responsible pursuant to Section 5.1(a) of this Agreement and (ii) any and all Tax-Related Losses arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant, or obligation of any member of the KAR Group pursuant to this Agreement.

                Section 2.15     Straddle Periods . If the taxable year or other taxable period of KAR or any member of the KAR Group or Spinco or any member of the Spinco Group does not close on the Distribution Date, then the allocation or apportionment of any Tax Items attributable to the portion of the Straddle Period ending on, or beginning after, the Distribution Date shall be deemed equal to the amount that would have been so attributable if such taxable year had closed on the Distribution Date; provided that (i) exemptions, allowances, or deductions that are calculated on an annual or periodic basis, and (ii) property Taxes or other Non-Income Taxes that are calculated on an annual or periodic basis and not assessed with respect to a transaction or series of transactions, shall be allocated between such portions in proportion to the number of days in each such portion. Notwithstanding the foregoing, the allocation or apportionment of Equity Award Deductions shall be governed by the Employee Matters Agreement.

Section 2.16     Tax Refunds .
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(a)            KAR shall be entitled to all Refunds for Taxes for which KAR is responsible pursuant to this Agreement, and Spinco shall be entitled to all Refunds for Taxes for which Spinco is responsible pursuant to this Agreement.

(b)            A Party receiving a Refund to which the other Party is entitled pursuant to this Agreement shall pay the amount to which such other Party is entitled within fifteen (15) Business Days after the receipt of the Refund.  For purposes of this Section 2.16(b) , any Refund that arises as a result of an offset, credit, or other similar benefit in respect of Taxes other than a receipt of cash shall be deemed to be received on the earlier of (i) the date on which a Tax Return is filed claiming such offset, credit, or other similar benefit and (ii) the date on which payment of the Tax which would have otherwise been paid absent such offset, credit, or other similar benefit is due (determined without taking into account any applicable extensions).

(c)            In the event that one Party receives a Refund to which the other Party is entitled, the amount of Refund the Party receiving such Refund shall be required to pay to the Party entitled to such Refund shall be net of any and all Tax-Related Losses or other costs and expenses incurred by the Party receiving the Refund (or any of such Party’s Affiliates) in connection with the receipt of such Refund or the payment of such Refund to the other Party.

                Section 2.17     Prior Agreements . Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement, any and all prior Tax sharing or allocation agreements or practices between any member of the KAR Group and any member of the Spinco Group shall be terminated with respect to the Spinco Group and the KAR Group as of the Distribution Date.  No member of either the Spinco Group or the KAR Group shall have any continuing rights or obligations under any such agreement.

ARTICLE III

PREPARATION AND FILING OF TAX RETURNS

                Section 3.1   KAR’ Responsibility .  KAR shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all Joint Returns and all KAR Separate Returns.

                Section 3.2   Spinco’s Responsibility .  Spinco shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all Tax Returns required to be filed by or with respect to members of the Spinco Group other than those Tax Returns which KAR is required to prepare and file under Section 3.1 . The Tax Returns required to be prepared and filed by Spinco under this Section 3.2 shall include any Spinco Separate Returns.

                Section 3.3   Right To Review Tax Returns . To the extent that the positions taken on any Tax Return (i) directly relate to matters for which the Reviewing Party may have an indemnification obligation to the Preparing Party, or that may give rise to a refund to which the Reviewing Party would be entitled under this Agreement or (ii) would reasonably be expected to materially adversely affect the Tax position of the Reviewing Party, the Preparing Party shall prepare the portions of such Tax Return that relates to the business of the Reviewing Party (the KAR Business or the Spinco Business, as the case may be), shall provide a draft of such portion of such Tax Return to the Reviewing Party for its review and comment at least ten (10) Business Days prior to the due date for such Tax Return (taking into account any applicable extensions). The Reviewing Party shall thereafter have five (5) Business Days to review such portion of such Tax Return and provide reasonable comments, if any, on such portion of such Tax Return to the Preparing Party, provided , however , that the Reviewing Party shall provide any reasonable comments it may have to the Preparing Party no later than two (2) Business Days prior to the due date for such Tax Return (taking into account any applicable extensions). The Preparing Party shall use commercially reasonable efforts to modify such portion of such Tax Return before filing such Tax Return to include the Reviewing Party’s reasonable comments, provided , however , that nothing herein shall prevent the Preparing Party from timely filing any such Tax Return and, provided , further , that KAR shall be entitled to resolve any issues arising out of the review of any such portion of a Tax Return in its sole discretion.
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              Section 3.4   Cooperation .  The Parties shall provide, and shall cause their Affiliates to provide, assistance and cooperation to one another in accordance with Article VII with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Article VIII .

                Section 3.5   T ax Reporting Practices .  Except as provided in Section 3.6 , with respect to any Tax Return for any taxable period that begins on or before the second anniversary of the Distribution Date with respect to which Spinco is the Preparing Party, such Tax Return shall be prepared in a manner (i) consistent with past practices, accounting methods, elections and conventions (“ Past Practices ”) used by KAR in preparing similar Tax Returns (unless there is no Reasonable Basis for the use of such Past Practices), and to the extent any items are not covered by Past Practices (or in the event that there is no Reasonable Basis for the use of such Past Practices), in accordance with reasonable Tax accounting practices selected by Spinco; and (ii) that, to the extent consistent with clause (i), minimizes the overall amount of Taxes due and payable on such Tax Return for all of the Parties by cooperating in making such elections or applications for group or other relief or allowances available in the taxing jurisdiction in which such Tax Return is filed. Spinco shall not take any action inconsistent with the assumptions (including items of income, gain, deduction, loss and credit) made in determining all estimated or advance payments of Taxes on or prior to the Distribution Date. In addition, Spinco shall not be permitted, and shall not permit any member of the Spinco Group, to make a change in any of its methods of accounting for Tax purposes until all applicable statutes of limitations for all Pre-Distribution Periods and Straddle Periods have expired, unless otherwise required by applicable Tax Law.

                Section 3.6   Reporting of Transactions .

(a)            KAR and Spinco shall timely file any appropriate information and statements (including as required by Section 6045B of the Code and Section 1.355-5 of the Treasury Regulations and, to the extent applicable, Section 1.368-3 of the Treasury Regulations) to report each step of the Transactions in accordance with the Intended Tax Treatment.  The Tax treatment of any step in or portion of the Transactions shall be reported on each applicable Tax Return consistently with the treatment thereof in any Tax Opinion, taking into account the jurisdiction in which such Tax Returns are filed, unless there is no Reasonable Basis for such Tax treatment.  In the event that a Party shall determine that there is no Reasonable Basis for such Tax treatment, such Party shall notify the other Party no later than twenty (20) Business Days prior to filing the relevant Tax Return and the Parties shall attempt in good faith to agree on the manner in which the relevant portion of the Transactions shall be reported.
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(b)            After the date hereof, the Parties shall cooperate in good faith to analyze the impact of a protective election under Section 336(e) of the Code and the Treasury Regulations issued thereunder for Spinco and each member of the Spinco Group with respect to the Distribution (a “ Protective Section 336(e) Election ”).  Solely in the event that KAR determines, in its sole discretion, to make a Protective Section 336(e) Election:

(i)            KAR and Spinco shall cooperate in making a timely protective election under Section 336(e) of the Code and Section 1.336-2(j) of the Treasury Regulations (and any similar provision of applicable state or local Tax Law) for each member of the Spinco Group that KAR determines for U.S. federal income tax purposes with respect to the Distribution in accordance with Section 1.336-2(h) of the Treasury Regulations and filing any statements, amending any Tax Returns or taking such other action reasonably necessary to carry out the Protective Section 336(e) Election. For the avoidance of doubt, it is intended that the Protective Section 336(e) Election, if made, will have no effect unless, pursuant to a Final Determination, the Distribution is treated as a “qualified stock disposition” within the meaning of Section 1.336-1(b)(6) of the Treasury Regulations.

(ii)            In the event that a Protective Section 336(e) Election is made and becomes effective, KAR shall determine, in its sole discretion, the “Aggregate Deemed Asset Disposition Price” and the “Adjusted Grossed-Up Basis” (each as defined under applicable Treasury Regulations) and the allocation of such Aggregate Deemed Asset Disposition Price and Adjusted Grossed-Up Basis among the disposition date assets of Spinco and its Subsidiaries, each in accordance with the applicable provisions of Section 336(e) of the Code and applicable Treasury Regulations (the “ Section 336(e) Allocation Statement ”), and shall provide a copy of such Section 336(e) Allocation Statement to Spinco.  To the extent the Protective Section 336(e) Election is made and becomes effective, each Party agrees not to take any position (and to cause each of its Affiliates not to take any position) that is inconsistent with the Protective Section 336(e) Election, including the Section 336(e) Allocation Statement, on any Tax Return, in connection with any Tax Contest or for any other Tax purposes (in each case, excluding any position taken for financial accounting purposes), except as may be required by a Final Determination.

(iii)            In the event that a Protective Section 336(e) Election is made and becomes effective and Spinco or any member of the Spinco Group realizes an increase in Tax basis as a result of such Protective Section 336(e) Election (the “ Section 336(e) Tax Basis Increase ”), then the cash Tax savings actually realized by Spinco or any member of the Spinco Group as a result of the Section 336(e) Tax Basis Increase if, as and when realized by Spinco or such member of the Spinco Group arising from the Section 336(e) Tax Basis Increase (including, for the avoidance of doubt, any such additional Section 336(e) Tax Basis Increase attributable to payments made pursuant to this Section 3.6(b) ) resulting from the Protective Section 336(e) Election, determined on a “with and without” basis (treating any deductions or amortization attributable to the step up in Tax basis resulting from the Protective 336(e) Election, or any other recovery of such step up, as the last items claimed for any taxable year, including after the utilization of any available net operating loss carryforwards) (the “ Section 336(e) Benefit Amount ”) shall be allocated as follows: (x) first, to KAR in the amount of the Incremental Section 336(e) Tax and (y) thereafter, shared between KAR and Spinco in the same proportion as the Taxes imposed on the Transactions giving rise to the Section 336(e) Tax Basis Increase were borne by KAR and Spinco (after giving effect to the indemnification obligations in this Agreement).
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(iv)            Within fifteen (15) Business Days of actually realizing any Section 336(e) Benefit Amount, the Party realizing the Section 336(e) Benefit Amount (including through the realization of such Section 336(e) Benefit Amount by such Party’s Affiliates) shall (i) notify the other Party of any such Section 336(e) Benefit Amount, including by providing such other Party with reasonable documentation of such Section 336(e) Benefit Amount and (ii) pay the other Party the amount of any such Section 336(e) Benefit Amount to which such other Party is entitled pursuant to Section 3.6(b)(iii) ; provided , however , that the amount of any such payment shall be net of any and all Tax-Related Losses or other costs and expenses incurred by the Party realizing the Section 336(e) Benefit Amount in connection with the realization of such Section 336(e) Benefit Amount or the payment of such Section 336(e) Benefit Amount to other Party.

(v)            For purposes of this Section 3.6(b) , a Party shall be deemed to have realized a Section 336(e) Benefit Amount on the earlier of: (i) the date on which a Tax Return is filed (taking into account any applicable extensions) that reflects actual cash tax savings as a result of any Section 336(e) Benefit Amount and (ii) the date on which payment of the relevant Tax which would have been due and payable absent any such Section 336(e) Tax Benefit Amount (determined without taking into account any applicable extensions).

                Section 3.7   Payment of Taxes .
(a)            With respect to any Tax Return required to be filed pursuant to this Agreement, the Preparing Party shall remit or cause to be remitted to the applicable Taxing Authority in a timely manner any Taxes due in respect of any such Tax Return. The obligation to make payments pursuant to this Section 3.7(a) shall not affect a Party’s right, if any, to receive payments under Article V or otherwise be indemnified with respect to that Tax liability.

(b)            The Preparing Party shall, no later than five (5) Business Days before the due date (taking into account any applicable extensions) of any Tax Return described in Section 3.1 or Section 3.2 , notify the other Party of any amount (or any portion of any such amount) shown as due on that Tax Return for which the other Party must indemnify the Preparing Party under this Agreement. The other Party shall pay such amount to the Preparing Party no later than the due date (taking into account any applicable extensions) of the relevant Tax Return. A failure by an Indemnitee to give notice as provided in this Section 3.7(b) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party has been actually prejudiced by such failure.
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                Section 3.8   Amended Returns and Carrybacks .

(a)            Spinco shall not, and shall not permit any member of the Spinco Group to, file or allow to be filed any amended Tax Return or request for an Adjustment for any Pre-Distribution Period or Straddle Period without the prior written consent of KAR, such consent to be exercised in KAR’s sole and absolute discretion.

(b)            Spinco shall, and shall cause each member of the Spinco Group to, make any available elections to waive the right to carry back any Tax Attribute from a taxable period or portion thereof ending after the Distribution Date to a taxable period or portion thereof ending on or before the Distribution Date.

(c)            Spinco shall not, and shall cause each member of the Spinco Group not to, make any affirmative election to carry back any Tax Attribute from a taxable period or portion thereof ending after the Distribution Date to a taxable period or portion thereof ending on or before the Distribution Date, without the prior written consent of KAR, such consent to be exercised in KAR’s sole and absolute discretion.

(d)            Receipt of consent by Spinco or a member of the Spinco Group from KAR pursuant to the provisions of this Section 3.8 shall not limit or modify Spinco’s continuing indemnification obligation pursuant to Article V .

                Section 3.9   Tax Benefits .  Except as otherwise provided in Section 3.6(b) , if (a) one Party is responsible for a Tax pursuant to this Agreement or under applicable Tax Law and (b) the other Party is entitled to a deduction, credit or other Tax benefit relating to such Tax, then the Party entitled to such deduction, credit or other Tax benefit shall pay to the Party responsible for such Tax the amount of any cash Tax savings realized by the entitled Party as a result of such deduction, credit or other Tax benefit, net of any Taxes imposed by any Taxing Authority on, related to, or attributable to, the receipt of or accrual of such Tax benefit, including any Taxes imposed by way of withholding or offset or any Tax-Related Losses or other costs and expenses incurred by the Party receiving the Tax benefit (or any of such Party’s Affiliates) in connection with the receipt of such Tax benefit or the payment of such Tax benefit to the other Party. To the extent that the amount of any Tax benefit in respect of which a payment was made under this Section 3.9 is later reduced by a Taxing Authority or in a Tax Contest, the Party that received such payment shall refund such payment to the Party that made such payment to the extent of such reduction.  The Parties shall cooperate in good faith to determine the existence of and size of any such Tax benefit; provided , however , that if the Parties cannot agree on such determination, KAR shall be entitled to make a final determination of the existence and size of any such Tax benefit in its sole discretion exercised in good faith.

                Section 3.10     Tax Attributes .
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(a)            KAR shall reasonably and in good faith advise Spinco in writing of the amount, if any, of any Tax Attributes arising in a Pre-Distribution Period that shall be allocated or apportioned to the Spinco Group under applicable Law; provided , however , that with respect to the determination of Tax basis of assets transferred to Spinco, KAR shall make such determination reasonably and in good faith and consistent with the books and records of KAR and its Subsidiaries.  KAR, all members of the KAR Group, Spinco and all members of the Spinco Group shall prepare all Tax Returns in accordance with such written notice unless there is not a Reasonable Basis for such determination or otherwise required by a Final Determination.  For the avoidance of doubt, KAR shall not be required to create or cause to be created any books and records or reports or other documents based thereon that are of the type customarily prepared by outside legal, financial or accounting advisors (including, without limitation, “earnings & profits studies,” “basis studies” or similar determinations) in order to comply with this Section 3.10 .

(b)            To the extent that the amount of any Tax Attribute is later reduced or increased by a Taxing Authority or Tax Contest, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 3.10(a) .

(c)            Notwithstanding the foregoing in this Section 3.10 , the allocation or apportionment of Equity Award Deductions shall be governed by the Employee Matters Agreement.

ARTICLE IV

TAX-FREE STATUS OF THE DISTRIBUTION

                Section 4.1   Representations and Warranties .

(a)            KAR, on behalf of itself and all other members of the KAR Group, hereby represents and warrants that (i) it has examined the IRS Ruling, each submission to the IRS in connection with the IRS Ruling, including the IRS Ruling Request, the Canadian Tax Ruling, each submission to the Canada Revenue Agency in connection with the Canadian Tax Ruling, including the Canadian Tax Ruling Request, the Tax Opinions, the Separation Plan, the Tax Certificates and any other materials delivered or deliverable in connection with the rendering of the Tax Opinions and the creation of the Separation Plan (collectively, the “ Tax Materials ”) and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to KAR or any member of the KAR Group or the KAR Business, were, at the time presented or represented and from such time until and including the Distribution Date, true, correct, and complete in all material respects. KAR, on behalf of itself and all other members of the KAR Group, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to KAR or any member of the KAR Group or the KAR Business.

(b)            Spinco, on behalf of itself and all other members of the Spinco Group, hereby represents and warrants that (i) it has examined the Tax Materials and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to Spinco or any member of the Spinco Group or the Spinco Business, were, at the time presented or represented and from such time until and including the Distribution Date, true, correct, and complete in all material respects. Spinco, on behalf of itself and all other members of the Spinco Group, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to Spinco or any member of the Spinco Group or the Spinco Business.
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(c)            Each of KAR, on behalf of it itself and all other members of the KAR Group, and Spinco, on behalf of itself and all other members of the Spinco Group represents and warrants that it knows of no fact (after due inquiry) that may cause the Transactions not to qualify for the Intended Tax Treatment.

(d)            Each of KAR, on behalf of it itself and all other members of the KAR Group, and Spinco, on behalf of itself and all other members of the Spinco Group represents and warrants that it has no plan or intent to take any action which is inconsistent with any statements or representations made in the Tax Materials.

                Section 4.2   Restrictions on KAR .

(a)            KAR, on behalf of itself and all other members of the KAR Group, hereby covenants and agrees that no member of the KAR Group will take, fail to take, or to permit to be taken: (i) any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in the Tax Materials, or (ii) any action which adversely affects or could reasonably be expected to adversely affect the Intended Tax Treatment of the Transactions.

                Section 4.3   Restrictions on Spinco .

(a)            Spinco, on behalf of itself and all other members of the Spinco Group, hereby covenants and agrees that no member of the Spinco Group will take, fail to take, or to permit to be taken: (i) any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in the Tax Materials, or (ii) any action which adversely affects or could reasonably be expected to adversely affect the Intended Tax Treatment of the Transactions.

(b)            During the Restricted Period, Spinco:

(i)            shall continue and cause to be continued the active conduct of the Spinco Business for purposes of Section 355(b)(2) of the Code, taking into account Section 355(b)(3) of the Code, as conducted immediately prior to the Distribution,

(ii)            shall not voluntarily dissolve or liquidate itself or any of its Affiliates (including any action that is a liquidation for U.S. federal income tax purposes),

(iii)            shall not (and shall not cause or permit any of its Affiliates to) (1) enter into any Proposed Acquisition Transaction or, to the extent Spinco has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur, (2) redeem or otherwise repurchase (directly or through an Affiliate) any Spinco stock, or rights to acquire Spinco stock, other than through stock purchases meeting the requirements of section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1 C.B. 696, (3) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the relative voting rights of its capital stock (including through the conversion of any capital stock into another class of capital stock), (4) merge or consolidate with any other Person or (5) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Tax Certificates) which in the aggregate would, when combined with any other direct or indirect changes in ownership of Spinco capital stock pertinent for purposes of Section 355(e) of the Code, have the effect of causing or permitting one or more Persons (whether or not acting in concert) to acquire directly or indirectly stock representing a fifty-percent or greater interest in Spinco or would reasonably be expected to result in a failure to preserve the Intended Tax Treatment of the Transactions; and
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(iv)            shall not and shall not permit any member of the Spinco Group, to sell, transfer, or otherwise dispose of or agree to, sell, transfer or otherwise dispose (including in any transaction treated for federal income tax purposes as a sale, transfer or disposition) of assets (including, any shares of capital stock of a Subsidiary) that, in the aggregate, constitute more than 20 percent of the consolidated gross assets of Spinco or the Spinco Group.  The foregoing sentence shall not apply to (1) sales, transfers, or dispositions of assets in the ordinary course of business, (2) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, (3) any assets transferred to a Person that is disregarded as an entity separate from the transferor for federal income tax purposes or (4) any mandatory or optional repayment (or pre-payment) of any indebtedness of Spinco or any member of the Spinco Group.  The percentages of gross assets or consolidated gross assets of Spinco or the Spinco Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of Spinco and the members of the Spinco Group as of the Distribution Date.  For purposes of this Section 4.3(b)(iv) , a merger of Spinco or one of its Subsidiaries with and into any Person that is not a wholly owned Subsidiary of Spinco shall constitute a disposition of all of the assets of Spinco or such Subsidiary.

(c)            During the period which begins with the Distribution Date and ends three (3) years thereafter, Spinco:

(i)            shall not (and shall not cause or permit any of its Affiliates to) (1) cease to control Canadian Spinco or Spinco’s Direct Subsidiary or (2) dispose of any shares of Canadian Spinco or Spinco’s Direct Subsidiary that were held at the time of the Distribution by Spinco or any of its Affiliates; and

(ii)            shall not (and shall not cause or permit any of its Affiliates to) sell, transfer, or otherwise dispose of any assets, or otherwise take any action that would result in the shares of Canadian Spinco having a value greater than ten (10) percent of the total value of the shares of either (1) Spinco or (2) Spinco’s Direct Subsidiary.
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(d)            Notwithstanding the restrictions imposed by Section 4.3(a) , Section 4.3 (b), or  Section 4.3 (c) , Spinco or a member of the Spinco Group may take any of the actions or transactions described therein if Spinco either (i) obtains an Unqualified Tax Opinion in form and substance reasonably satisfactory to KAR or (ii) obtains the prior written consent of KAR waiving the requirement that Spinco obtain an Unqualified Tax Opinion, such waiver to be provided in KAR’s sole and absolute discretion.  KAR’s evaluation of an Unqualified Tax Opinion may consider, among other factors, the appropriateness of any underlying assumptions, representations, and covenants made in connection with such opinion.  Spinco shall bear all costs and expenses of securing any such Unqualified Tax Opinion and shall reimburse KAR for all reasonable out-of-pocket expenses that KAR or any of its Affiliates may incur in good faith in seeking to obtain or evaluate any such Unqualified Tax Opinion.  Neither the delivery of an Unqualified Tax Opinion nor KAR’s waiver of Spinco’s obligation to deliver an Unqualified Tax Opinion shall limit or modify Spinco’s continuing indemnification obligation pursuant to Article V .

ARTICLE V

INDEMNITY OBLIGATIONS

                Section 5.1   I ndemnity Obligations .

(a)            KAR shall indemnify and hold harmless Spinco from and against, and will reimburse Spinco for, (i) all liability for Taxes allocated to KAR pursuant to this Agreement, (ii) all Tax-Related Losses arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant, or obligation of any member of the KAR Group pursuant to this Agreement (including but not limited to any of the foregoing contained in Section 4.1 or Section 4.2 ) or any Tax Materials, (iii) any other Tax-Related Loss resulting (for the avoidance of doubt, in whole or in part) from an acquisition after the Distribution of any stock or assets of KAR (or any KAR Affiliate) by any means whatsoever by any Person, and (iv) any other amounts KAR is required to pay to Spinco pursuant to the terms of this Agreement.

(b)            Without regard to whether an Unqualified Tax Opinion may have been provided or whether any action is permitted or consented to hereunder and notwithstanding anything else to the contrary contained herein, Spinco shall indemnify and hold harmless KAR from and against, and will reimburse KAR for, (i) all liability for Taxes allocated to Spinco pursuant to this Agreement, (ii) all Tax-Related Losses arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant, or obligation of any member of the Spinco Group pursuant to this Agreement (including but not limited to any of the foregoing contained Section 4.1 or Section 4.2 ) or any Tax Materials, (iii) any other Tax-Related Loss resulting (for the avoidance of doubt, in whole or in part) from an acquisition after the Distribution of any stock or assets of Spinco (or any Spinco Affiliate) by any means whatsoever by any Person, (iv) the amount of any Refund received by any member of the Spinco Group that is allocated to KAR pursuant to Section 2.16(a) , and (v) any other amounts Spinco is required to pay to KAR pursuant to the terms of this Agreement (including, but not limited to, any amounts Spinco is required to pay KAR pursuant to Section 3.6(b) ).
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(c)            To the extent that any Tax-Related Loss is subject to indemnity pursuant to both Section 5.1(a) and Section 5.1(b) , each of KAR and Spinco shall pay and be responsible for fifty (50) percent of such Tax-Related Loss.

                Section 5.2   Indemnification Payments .

(a)            Except as otherwise provided in this Agreement, if either Party (the “ Indemnitee ”) is required to pay to a Taxing Authority a Tax or to another Person a payment in respect of a Tax that the other Party (the “ Indemnifying Party ”) is liable for under this Agreement, including as the result of a Final Determination, the Indemnitee shall notify the Indemnifying Party, in writing, of its obligation to pay such Tax and, in reasonably sufficient detail, its calculation of the amount due by such Indemnifying Party to the Indemnitee, including any other Tax-Related Losses attributable thereto.  The Indemnifying Party shall pay such amount, including any other Tax-Related Losses attributable thereto, to the Indemnitee no later than the later of (i) five (5) Business Days prior to the date on which such payment is due to the applicable Taxing Authority or (ii) fifteen (15) Business Days after the receipt of notice from the other Party.

(b)            If, as a result of any change or redetermination made with respect to Article II , any amount previously allocated to and borne by one Party pursuant to the provisions of Article II   is thereafter allocated to the other Party, then, no later than fifteen (15) Business Days after such change or redetermination, such other Party shall pay to such Party the amount previously borne by such Party which is allocated to such other Party as a result of such change or redetermination.

                Section 5.3   Payment Mechanics .

(a)            Subject to Section 10.7 , all payments under this Agreement shall be made by KAR directly to Spinco and by Spinco directly to KAR; provided , however , that if the Parties mutually agree with respect to any such indemnification payment, any member of the KAR Group, on the one hand, may make such indemnification payment to any member of the Spinco Group, on the other hand, and vice versa.  All indemnification payments shall be treated in the manner described in Section 5.4 .

(b)            In the case of any payment of Taxes made by a Preparing Party or Indemnitee pursuant to this Agreement for which such Preparing Party or Indemnitee, as the case may be, has received a payment from the other Party, such Preparing Party or Indemnitee shall provide to the other Party a copy of any official government receipt received with respect to the payment of such Taxes to the applicable Taxing Authority (or, if no such official governmental receipts are available, executed bank payment forms or other reasonable evidence of payment).
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                Section 5.4   Treatment of Payments .  The Parties agree that any payment made among the Parties pursuant to this Agreement shall be treated, to the extent permitted by law, for all U.S. federal income tax purposes as either (i) a non-taxable contribution by KAR to Spinco, or (ii) a distribution by Spinco to KAR, in each case, made immediately prior to the Distribution.  Any Tax indemnity payment made by a Party under this Agreement shall be increased as necessary so that after making all payments in respect to Taxes imposed on or attributable to such indemnity payment, the recipient Party receives an amount equal to the sum it would have received had no such Taxes been imposed.

ARTICLE VI

TAX CONTESTS

                Section 6.1   Notice .  Each Party shall notify the other Party in writing within ten (10) Business Days after receipt by such Party or any member of its Group of a written communication from any Taxing Authority with respect to any pending or threatened audit, claim, dispute, suit, action, proposed assessment or other proceeding (a “ Tax Contest ”) concerning any Taxes for which the other Party may be liable pursuant to this Agreement, and thereafter shall promptly forward or make available to such Party copies of notices and communications relating to such Tax Contest.  A failure by an Indemnitee to give notice as provided in this Section 6.1 (or to promptly forward any such notices or communications) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure.

                Section 6.2   Separate Returns . In the case of any Tax Contest with respect to any Separate Return, the Party having the liability for the Tax pursuant to this Agreement shall have the sole responsibility and right to control the prosecution of such Tax Contest, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Contest; provided , however , that the Controlling Party of such Tax Contest shall not take any action that could reasonably result in the increased liability for Taxes of the Non-Controlling Party or a member of the Non-Controlling Party’s Group without the prior written consent of the Non-Controlling Party, such consent not to be unreasonably withheld, conditioned or delayed.

                Section 6.3   Joint Returns . In the case of any Tax Contest with respect to any Joint Return, KAR shall have the sole responsibility and right to control the prosecution of such Tax Contest, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Contest; provided , however , that to the extent that such Tax Contest relates to Taxes for which Spinco has an indemnification obligation pursuant to this Agreement, KAR shall (a) defend such Tax Contest diligently and in good faith, (b) keep Spinco informed in a timely manner of all actions proposed to be taken by KAR with respect to such Tax Contest (or, to the extent practicable, the portion of such Tax Contest that relates to Taxes for which Spinco is responsible pursuant to this Agreement) and (c) not settle any such Tax Contest without the prior written consent of Spinco, which shall not be unreasonably withheld, conditioned or delayed, to the extent such settlement relates to a material indemnification obligation of Spinco pursuant to this Agreement.
24
                Section 6.4   Other Tax Contests . KAR shall have the sole responsibility and right to control the prosecution of any Tax Contest not covered under Section 6.2 or Section 6.3 , including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Contest; provided , however , that to the extent that such Tax Contest relates to Taxes for which Spinco has an indemnification obligation pursuant to this Agreement, KAR shall (a) defend such Tax Contest diligently and in good faith, (b) keep Spinco informed in a timely manner of all actions proposed to be taken by KAR with respect to such Tax Contest (or, to the extent practicable, the portion of such Tax Contest that relates to Taxes for which Spinco is responsible pursuant to this Agreement) and (c) not settle any such Tax Contest without the prior written consent of Spinco, which shall not be unreasonably withheld, conditioned or delayed, to the extent such settlement relates to a material indemnification obligation of Spinco pursuant to this Agreement.

                Section 6.5   Obligation of Continued Notice .  During the pendency of any Tax Contest or threatened Tax Contest, each of the Parties shall provide prompt notice to the other Party of any written communication received by it or a member of its respective Group from a Taxing Authority regarding any Tax Contest for which it is indemnified by the other Party hereunder or for which it may be required to indemnify the other Party hereunder.  Such notice shall include copies of the pertinent portion of any written communication from a Taxing Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Taxing Authority in respect of any such matters.  Such notice shall be provided in a timely fashion; provided , however , that in the event that timely notice is not provided, a Party shall be relieved of its obligation to indemnify the other Party only to the extent that such delay results in actual increased costs or actual prejudice to such other Party.

                Section 6.6   Settlement Rights .  Unless waived by the Parties in writing, in connection with any potential adjustment  or settlement in a Tax Contest as a result of which adjustment or settlement the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement: (i) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment or settlement in such Tax Contest; (ii) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment or settlement in such Tax Contest; and (iii) the Controlling Party shall defend such Tax Contest diligently and in good faith. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.
25

Section 6.7         Tax Contest Costs and Expenses . In the event that a Tax Contest could reasonably impact the amount of Taxes, Tax Attributes, Refunds or other Tax benefits of both the Controlling Party and the Non-Controlling Party (taking into account the terms of this Agreement), the Non-Controlling Party shall reimburse the Controlling Party for its allocable share of costs and expenses (including employee compensation, court costs, filing fees and accounting, legal and other professional fees) based on the proportion that the amount of Taxes, Tax Attributes, Refunds, or other Tax benefits of the Non-Controlling Party that could reasonably be impacted by such Tax Contest bear to the whole amount that could be impacted by such Tax Contest.

ARTICLE VII

COOPERATION

                Section 7.1   General .

(a)            Each Party shall fully cooperate, and shall cause all members of such Party’s Group to fully cooperate, with all reasonable requests in writing from the other Party, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of any Tax Return, claims for Refunds, the conduct of any Tax Contest, and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of either Party or any member of either Party’s Group covered by this Agreement and the establishment of any reserve required in connection with any financial reporting (a “ Tax Matter ”). Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with a Tax Matter and shall include, without limitation, at each Party’s own cost:

(i)            the provision of any Tax Returns of either Party or any member of either Party’s Group, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities;

(ii)            the execution of any document (including any power of attorney) in connection with any Tax Contest of either Party or any member of either Party’s Group, or the filing of a Tax Return or a Refund claim of either Party or any member of either Party’s Group;

(iii)            the use of the Party’s reasonable best efforts to obtain any documentation in connection with a Tax Matter; and

(iv)            the use of the Party’s reasonable best efforts to obtain any Tax Returns (including accompanying schedules, related work papers, and documents), documents, books, records or other information in connection with the filing of any Tax Returns of either Party or any member of either Party’s Group.
26


Each Party shall make its employees and facilities available, without charge, on a mutually convenient basis to facilitate such cooperation.

                Section 7.2   Consistent Treatment .  Unless and until there has been a Final Determination to the contrary, each Party agrees not to take any position on any Tax Return, in connection with any Tax Contest or otherwise, that is inconsistent with (a) the treatment of payments between the KAR Group and the Spinco Group as set forth in Section 5.4 , or (b) the Intended Tax Treatment.

ARTICLE VIII

RETENTION OF RECORDS; ACCESS

                Section 8.1   Retention of Records .  For so long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (i) sixty (60) days after the expiration of any applicable statutes of limitation (including any waivers or extensions thereof) and (ii) seven years after the Distribution Date, the Parties shall retain records, documents, accounting data and other information (including computer data) necessary for the preparation and filing of all Tax Returns (collectively, “ Tax Records ”) in respect of Taxes of any member of either the KAR Group or the Spinco Group for any Pre-Distribution Period, Straddle Period, or Post-Distribution Period or for any Tax Contests relating to such Tax Returns.  At any time after the Distribution Date that the KAR Group proposes to destroy such records or documents, it shall first notify the Spinco Group in writing and the Spinco Group shall be entitled to receive such records or documents proposed to be destroyed. At any time after the Distribution Date that the Spinco Group proposes to destroy such records or documents, it shall first notify the KAR Group in writing and the KAR Group shall be entitled to receive such records or documents proposed to be destroyed. The Parties shall notify each other in writing of any waivers or extensions of the applicable statute of limitations that may affect the period for which the foregoing records or other documents must be retained.

                Section 8.2   Access to Tax Records .  The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Taxing Authority or other Tax auditor direct access, during normal business hours upon reasonable notice, to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items pursuant to this Agreement.  The Party seeking access to the records of the other Party shall bear all costs and expenses associated with such access, including any professional fees; provided , however , that if the access to Tax Records pursuant to this Section 8.2 results in a Refund, Tax benefit or other reduction in Taxes to the Party providing such access, the Party providing access shall reimburse the Party seeking access for the providing Party’s allocable portion of the costs and expenses of the Party seeking access, based on the amount of Refund, Tax benefit or other reduction in Taxes realized by the Party providing access.
27
ARTICLE IX

DISPUTE RESOLUTION

                Section 9.1   Dispute Resolution Mechanics . The Parties shall attempt in good faith to resolve any disagreement arising with respect to this Agreement, including any dispute in connection with a claim by a third party (a “ Dispute ”). Either Party may give the other Party written notice of any Dispute not resolved in the normal course of business. If the Parties cannot agree within thirty (30) Business Days following the date on which one Party gives such notice (the “ Dispute Date ”), then the Dispute shall be referred to a Tax Expert acceptable to each of the Parties to act as an arbitrator in order to resolve the Dispute. If the Parties are unable to agree upon a Tax Expert within ten (10) Business Days, the Tax Expert selected by KAR and the Tax Expert selected by Spinco shall jointly select a Tax Expert that will resolve the Dispute. Such Tax Expert shall be empowered to resolve the Dispute, including by engaging nationally recognized lar firms, accountants and other experts. The Tax Expert chosen to resolve the Dispute shall furnish written notice to the Parties of its resolution of such Dispute as soon as practicable, but in no event later than forty-five (45) Business Days after its acceptance of the matter for resolution. Any such resolution by the Tax Expert shall be conclusive and binding on the Parties. The fees and expenses of the Tax Expert shall be allocated between the Parties in the same proportion that the aggregate amount of disputed items that were determined in favor of the other Party (as finally determined by the Tax Expert) bears to the total amount of disputed items submitted by the Parties.

ARTICLE X

MISCELLANEOUS PROVISIONS

                Section 10.1     Conflicting Agreements .  In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Separation and Distribution Agreement, this Agreement shall control with respect to the subject matter thereof.

                Section 10.2     Termination . This Agreement will terminate without further action at any time before the Distribution upon termination of the Separation and Distribution Agreement. If terminated, no Party will have any liability of any kind to the other Party or any other Person on account of this Agreement, except as provided in the Separation and Distribution Agreement.

                Section 10.3     Interest on Late Payments .  With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in this Agreement for such payment, the outstanding amount will accrue interest at a rate per annum equal to the rate in effect for underpayments under Section 6621 of the Code from such due date to and including the payment date.

                Section 10.4     Specific Performance . In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, KAR shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. Spinco shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. The Parties agree that the remedies at law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived. The Parties acknowledge and agree that the right of specific enforcement is an integral part of this Agreement and without that right, neither KAR nor Spinco would have entered into this Agreement.
28
                Section 10.5     Successors .  This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to any of the parties hereto, to the same extent as if such successor had been an original party to this Agreement.

                Section 10.6     Application to Present and Future Subsidiaries .  This Agreement is being entered into by KAR and Spinco on behalf of themselves and the members of their respective Group. This Agreement shall constitute a direct obligation of each such Party and shall be deemed to have been readopted and affirmed on behalf of any entity that becomes a Subsidiary of KAR or Spinco in the future.

                Section 10.7     Assig nability .  This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the other Party (not to be unreasonably withheld or delayed), and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. Notwithstanding the foregoing, this Agreement shall be assignable to (i) with respect to KAR, an Affiliate of KAR, or (ii) a bona fide third party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant Party hereto by operation of law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party to this Agreement. No assignment permitted by this Section 10.7 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

                Section 10.8     No Fiduciary Relationship .  The duties and obligations of the Parties, and their respective successors and permitted assigns, contained herein are the extent of the duties and obligations contemplated by this Agreement; nothing in this Agreement is intended to create a fiduciary relationship between the Parties hereto, or any of their successors and permitted assigns, or create any relationship or obligations other than those explicitly described.

Section 10.9      No Duplication; No Double Recovery . Nothing in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, benefit, reduction, obligation or recovery with respect to any matter arising out of the same facts and circumstances.

                Section 10.10   Further Assurances .  Subject to the provisions hereof, the Parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby.
29
                Section 10.11   Survival .  Notwithstanding any other provision of this Agreement to the contrary, all representations, covenants and obligations contained in this Agreement shall survive until the expiration of the applicable statute of limitations with respect to any such matter (including extensions thereof).

                Section 10.12   Notices .  All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.12 ):

 
If to KAR, to:
     
   
KAR Auction Services, Inc.
   
13085 Hamilton Crossing Boulevard
   
Carmel, Indiana 46032
   
Email:
becca.polak@karauctionservices.com
   
Attention:
Chief Legal Officer
   
 
with a copy (prior to the Effective Time) to:
     
   
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Email:
Sean.Doyle@skadden.com
     
Gregory.Fernicola@skadden.com
     
Dwight.Yoo@skadden.com
   
Attention:
Sean C. Doyle
     
Gregory A. Fernicola
     
Dwight S. Yoo
   
 
If to SpinCo, to:
     
   
Insurance Auto Auctions, Inc.
   
Two Westbrook Corporate Center, Suite 500
   
Westchester, Illinois 60154
   
Email:
jkett@iaai.com
     
skerley@iaai.com
   
Attention:
John Kett
     
Sidney Peryar
   
 
with a copy (prior to the Effective Time) to:
     
   
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Email:
Sean.Doyle@skadden.com
     
Gregory.Fernicola@skadden.com
     
Dwight.Yoo@skadden.com
   
Attention:
Sean C. Doyle
     
Gregory A. Fernicola
     
Dwight S. Yoo

30
                Section 10.13   Effective Date .  This Agreement shall become effective only upon the occurrence of the Distribution.

*            *          *

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31


IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the day and year first above written.

 
KAR Auction Services, Inc..
     
 
By:
/s/ Eric M. Loughmiller
   
Name: Eric M. Loughmiller
   
Title: Executive Vice President and Chief Financial Officer
     
 
IAA, Inc.
     
 
By:
/s/ John W. Kett
   
Name: John W. Kett
   
Title: Chief Executive Officer and President

32
EXHIBIT A

[Separation Plan]

33

Exhibit 10.3











EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

KAR AUCTION SERVICES, INC.

AND

IAA, INC.

DATED AS OF JUNE 27, 2019









TABLE OF CONTENTS
     
   
Page
     
Article I
     
DEFINITIONS
     
Section 1.01
Definitions
1
Section 1.02
Interpretation
3
     
Article II
     
GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES
     
Section 2.01
General Principles
4
Section 2.02
Service Credit
5
Section 2.03
Benefit Plans
5
Section 2.04
Individual Agreements
6
Section 2.05
Non-U.S. Jurisdictions
6
Section 2.06
Assignment and Assumption of Assets and Liabilities
6
     
Article III
     
ASSIGNMENT OF EMPLOYEES
     
Section 3.01
Active Employees
7
     
Article IV
     
EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION
     
Section 4.01
Generally
8
Section 4.02
Equity Incentive Awards
8
Section 4.03
Non-Equity Incentive Plans
11
Section 4.04
Director Compensation
11
     
Article V
     
U.S. QUALIFIED RETIREMENT PLANS
     
Section 5.01
SpinCo U.S. Savings Plan
12
     
Article VI
     
Director Deferred Compensation Plan
     
Section 6.01
KAR
13
Section 6.02
SpinCo.
13
     
Article VII
     
WELFARE BENEFIT PLANS
     
Section 7.01
Welfare Plans
14
Section 7.02
U.S. COBRA and HIPAA
14
Section 7.03
Vacation, Holidays and Leaves of Absence
15
Section 7.04
Severance and Unemployment Compensation
15
Section 7.05
Workers’ Compensation
15
Section 7.06
Insurance Contracts
15
Section 7.07
Third-Party Vendors
15
Section 7.08
SpinCo Retained Welfare Plans
15

i

     
Article VIII
     
NON-U.S. EMPLOYEES
     
Section 8.01
General
16
     
Article IX
     
MISCELLANEOUS
     
Section 9.01
Employee Records
16
Section 9.02
Preservation of Rights to Amend
16
Section 9.03
Fiduciary Matters
17
Section 9.04
Further Assurances
17
Section 9.05
Counterparts; Entire Agreement; Corporate Power
17
Section 9.06
Governing Law
17
Section 9.07
Assignability
17
Section 9.08
Third-Party Beneficiaries
18
Section 9.09
Notices
18
Section 9.10
Severability
18
Section 9.11
Force Majeure
19
Section 9.12
Headings
19
Section 9.13
Survival of Covenants
19
Section 9.14
Waivers of Default
19
Section 9.15
Dispute Resolution
19
Section 9.16
Specific Performance
19
Section 9.17
Amendments
19
Section 9.18
Interpretation
19
Section 9.19
Limitations of Liability
19
Section 9.20
Mutual Drafting
19

ii

EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT, dated as of June 27, 2019 (this “ Agreement ”), is by and between KAR Auction Services, Inc., a Delaware corporation (“ KAR ”), and IAA, Inc., a Delaware corporation and wholly owned subsidiary of KAR (“ SpinCo ”).

WHEREAS, as contemplated by the Separation and Distribution Agreement between KAR and SpinCo dated June 27, 2019, KAR and SpinCo desire to enter into this Agreement to provide for the allocation of Assets, Liabilities, and responsibilities with respect to certain matters relating to employees and other individual service providers (including employee compensation and benefit plans and programs) between them.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01             Definitions .  For purposes of this Agreement, the following terms shall have the meanings set forth below.  Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to them in the Separation and Distribution Agreement.

“ 17/18 KAR PRSU ” shall have the meaning set forth in Section 4.02(b)(i) .

“ 19 KAR PRSU ” shall have the meaning set forth in Section 4.02(b)(ii) .

“ 19 SpinCo PRSU ” shall have the meaning set forth in Section 4.02(b)(ii) .

“ Action ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Affiliate ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Agreement ” shall have the meaning set forth in the preamble to this Agreement and shall include all Schedules hereto (which may be delivered as soon as practicable following the Effective Time) and all amendments, modifications, and changes hereto entered into pursuant to Section 9.17 .

“ Ancillary Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Assets ” shall have the meaning set forth in the Separation and Distribution Agreement.

“ Benefit Plan ” shall mean any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature from an employer to any Employee, or to any family member, dependent, or beneficiary of any such Employee, including pension plans, savings plans, thrift plans, supplemental pension plans and Welfare Plans, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits, severance benefits, change in control protections or benefits, travel and accident, life, accidental death and dismemberment, disability and accident insurance, tuition reimbursement, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays; provided , however , the term “Benefit Plan” does not include any government-sponsored benefits, such as workers’ compensation, unemployment or any similar plans, programs or policies.

“ Closing KAR Stock Price ” shall have the meaning set forth in Section 4.02(a)(i)(B) .

“ COBRA ” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq . of ERISA and at Section 4980B of the Code.

“ Covered Participants ” shall have the meaning set forth in Section 6.02(a) .

“ Effective Time ” shall mean the Distribution Effective Time as defined in the Separation and Distribution Agreement.

“ Employee ” shall mean any KAR Group Employee or SpinCo Group Employee.

“ Employment Taxes ” shall mean any federal, state, local or foreign Taxes, charges, fees, duties, levies, imposts, rates, social security contributions or other assessments or obligations, in each case in the nature of a Tax, imposed on, due or asserted to be due from (i) Employees or Former Employees or (ii) the KAR Group or the SpinCo Group as employers or former employers of such Employees or Former Employees including employers’ and employees’ portions of Federal Insurance Contributions Act Taxes, employers’ Federal Unemployment Tax Act taxes and state and local unemployment insurance taxes, and employers’ withholding, reporting and remitting obligations with respect to any such Taxes or employees’ federal, state and local income taxes that are imposed on or due from Employees or Former Employees.

“ Equity Award Deduction ” shall mean any Tax deduction that may be taken pursuant to applicable Law with respect to any KAR Award or any SpinCo Award held by any Employee or any Former Employee.

“ ERISA ” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“ Former Employees ” shall mean Former KAR Group Employees and Former SpinCo Group Employees.

“ Former KAR Group Employee ” shall mean any individual who is a former employee of KAR or any of its Subsidiaries as of the Effective Time and who is not a Former SpinCo Group Employee.

“ Former SpinCo Group Employee ” shall mean any individual who is a former employee of KAR or any of its Subsidiaries as of the Effective Time and who, during the final twelve (12) months of his or her employment, was primarily in the service of the SpinCo Business.

“ General Continuation Period ” shall mean a period of time commencing as of the Distribution Date and ending on December 31, 2019.

“ HIPAA ” shall mean the U.S. Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.

“ Individual Agreement ” shall mean any individual (i) employment contract, (ii) retention, severance or change of control agreement, (iii) expatriate (including any international assignee) contract or agreement (including agreements and obligations regarding repatriation, relocation, equalization of taxes and living standards in the host country), or (iv) other agreement containing restrictive covenants (including confidentiality, non-competition and non-solicitation provisions) between a member of the KAR Group and a SpinCo Group Employee, as in effect immediately prior to the Effective Time.

“ IRS ” shall mean the United States Department of Treasury Internal Revenue Service.

“ KAR ” shall have the meaning set forth in the preamble to this Agreement.

“ KAR Award ” means the adjusted KAR Options, the KAR RSUs, KAR Restricted Stock Awards, and the KAR PRSUs, collectively.

“ KAR Benefit Plan ” shall mean any Benefit Plan established, sponsored or maintained by KAR or any of its Subsidiaries immediately prior to the Effective Time, excluding any SpinCo Benefit Plan.

“ KAR Change of Control ” shall have the meaning set forth in Section 4.02(h) .

“ KAR Compensation Committee ” shall mean the Compensation Committee of the KAR Board.

“ KAR Director Plan ” shall have the meaning set forth in Section 6.01 .

“ KAR Equity-Based Plans ” means the Stock Incentive Plan and the 2009 Omnibus Stock and Incentive Plan, each as amended from time to time.

“ KAR ESPP ” shall have the meaning set forth in Section 4.02(m)(i) .

“ KAR Group Employee ” shall mean each individual who is employed by the KAR Group as of the Effective Time and who is not a SpinCo Group Employee (including any such individual who is not actively working as of the Effective Time as a result of illness, injury, vacation or other leave of absence).

“ KAR Savings Plan ” shall mean the KAR Auction Services, Inc. 401(k) Plan.

“ KAR Service Provider ” shall mean each KAR Group Employee and each individual who is a member of the KAR Board as of the Effective Time and is not a Transferred Director.

“ KAR Welfare Plan ” shall mean any Welfare Plan established, sponsored, maintained or contributed to by KAR or any of its Subsidiaries for the benefit of Employees or Former Employees, including but not limited to each Welfare Plan listed on Schedule 1.01(c) but excluding any SpinCo Welfare Plan.

“ Opening KAR Stock Price ” shall have the meaning set forth in Section 4.02(a)(i)(B) .

“ Opening SpinCo Stock Price ” shall have the meaning set forth in Section 4.02(a)(i)(B) .

“ Option ,” when immediately preceded by “KAR,” means an option (either nonqualified or an incentive stock option) to purchase KAR Shares granted by KAR prior to the Effective Time pursuant to a KAR Equity-Based Plan and, when immediately preceded by “SpinCo,” means an option to purchase SpinCo Shares, which option is granted pursuant to the SpinCo Long Term Incentive Plan as part of the adjustment to KAR Options as set forth in Section 4.02 .

“ Party ” shall mean a party to this Agreement.

“ Providing Party ” shall have the meaning set forth in Section 2.02(b) .

“ PRSU ,” when immediately preceded by “KAR,” means a performance-based RSU granted by KAR prior to the Effective Time pursuant to a KAR Equity-Based Plan and when immediately preceded by “SpinCo,” means a performance-based RSU granted by SpinCo granted pursuant to the SpinCo Long Term Incentive Plan as part of the adjustment to KAR PRSUs as set forth in Section 4.02 .
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“ Requesting Party ” shall have the meaning set forth in Section 2.02(b) .

“ Restricted Stock Award ,” when immediately preceded by “KAR,” means a KAR Share granted by KAR prior to the Effective Time pursuant to a KAR Equity-Based Plan which is subject to vesting and forfeiture restrictions and when immediately preceded by “SpinCo,” means a SpinCo Share, which is granted pursuant to the SpinCo Long Term Incentive Plan as part of the adjustment to KAR Restricted Stock Awards as set forth in Section 4.02 which is subject to vesting and forfeiture restrictions.

“ RSU ,” when immediately preceded by “KAR,” means a restricted stock unit granted by KAR prior to the Effective Time pursuant to a KAR Equity-Based Plan representing a general unsecured promise by KAR to deliver a KAR Share or an amount in cash equal to the value of a KAR Share and when immediately preceded by “SpinCo,” means a restricted stock unit granted by SpinCo representing a general unsecured promise by SpinCo to deliver a SpinCo Share or an amount in cash equal to the value of a SpinCo Share, which unit is granted pursuant to the SpinCo Long Term Incentive Plan as part of the adjustment to KAR RSUs as set forth in Section 4.02 .

“ Securities Act ” shall mean the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

“ Separation and Distribution Agreement ” shall have the meaning set forth in the recitals to this Agreement.

“ SpinCo ” shall have the meaning set forth in the preamble to this Agreement.

“ SpinCo Award ” means the SpinCo Options, the SpinCo RSUs, the SpinCo Restricted Stock Awards, and the SpinCo PRSUs, collectively.

“ SpinCo Benefit Plan ” shall mean any Benefit Plan established, sponsored, maintained or contributed to by a member of the SpinCo Group as of or after the Effective Time.

“ SpinCo Board ” shall mean the Board of Directors of SpinCo.

“ SpinCo Change of Control ” shall have the meaning set forth in Section 4.02(h) .

“ SpinCo Director Plan ” shall have the meaning set forth in Section 6.02(a) .

“ SpinCo Group Employee ” shall mean those individuals employed by the SpinCo Group as of the Effective Time (including any such individual who is not actively working as of the Effective Time as a result of illness, injury, vacation or other leave of absence).

“ SpinCo Long Term Incentive Plan ” means the SpinCo Omnibus Stock and Incentive Plan adopted by SpinCo prior to the Effective Time.

“ SpinCo Retained Welfare Plans ” shall have the meaning set forth in Section 7.08 .

“ SpinCo Savings Plan ” shall mean the IAA 401(k) Plan.

“ SpinCo Service Provider ” shall mean each SpinCo Group Employee and each individual who is a member of the SpinCo Board as of the Effective Time, including the Transferred Directors.

“ SpinCo Welfare Plans ” shall mean the Welfare Plans established, sponsored, maintained or contributed to by any member of the SpinCo Group for the benefit of SpinCo Group Employees and Former SpinCo Group Employees.

“ Transferred Director ” shall have the meaning set forth in Section 4.04(a) .

“ U.S. ” shall mean the United States of America.

“ Welfare Plan ” shall mean any “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, mental health, substance abuse and retiree health), disability benefits, or life, accidental death and dismemberment, and business travel insurance, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time-off programs, contribution funding toward a health savings account, flexible spending accounts or cashable credits.

Section 1.02             Interpretation . Section 10.16 of the Separation and Distribution Agreement is hereby incorporated by reference.
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ARTICLE II

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 2.01             General Principles .

(a)             Acceptance and Assumption of SpinCo Liabilities .  On or prior to the Effective Time, but in any case prior to the Distribution, SpinCo and the applicable SpinCo Designees shall accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities in accordance with their respective terms (each of which shall be treated as a SpinCo Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by KAR’s or SpinCo’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the KAR Group or the SpinCo Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the KAR Group or the SpinCo Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates:

(i)              any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any SpinCo Group Employees and Former SpinCo Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;

(ii)              any and all Liabilities whatsoever with respect to claims made by or with respect to any SpinCo Group Employees or Former SpinCo Group Employees in connection with any Benefit Plan not retained or assumed by any member of the KAR Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement;

(iii)              any and all Employment Taxes with respect to SpinCo Group Employees and Former SpinCo Group Employees;

(iv)              any and all other employment or service-related Liabilities with respect to SpinCo Group Employees and Former SpinCo Group Employees; and

(v)              any and all Liabilities expressly assumed or retained by any member of the SpinCo Group pursuant to this Agreement or Schedule 2.4(a) of the Separation and Distribution Agreement.

(b)             Acceptance and Assumption of KAR Liabilities .  On or prior to the Effective Time, but in any case prior to the Distribution, KAR and certain members of the KAR Group designated by KAR shall accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities held by SpinCo or any SpinCo Designee and KAR and the applicable members of the KAR Group shall be responsible for such Liabilities in accordance with their respective terms (each of which shall be treated as a KAR Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by KAR’s or SpinCo’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the KAR Group or the SpinCo Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the KAR Group or the SpinCo Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates:

(i)              any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any KAR Group Employees and Former KAR Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;

(ii)              any and all Liabilities whatsoever with respect to claims made by or with respect to any KAR Group Employees or Former KAR Group Employees in connection with any Benefit Plan not retained or assumed by any member of the SpinCo Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement;

(iii)              any and all Employment Taxes with respect to KAR Group Employees and Former KAR Group Employees;

(iv)              any and all other employment or service-related Liabilities with respect to KAR Group Employees and Former KAR Group Employees; and

(v)              any and all Liabilities expressly assumed or retained by any member of the KAR Group pursuant to this Agreement or Schedule 2.4(b) of the Separation and Distribution Agreement.

(c) Unaddressed Liabilities .   To the extent that this Agreement does not address particular Liabilities under any Benefit Plan and the Parties later determine that they should be allocated in connection with the Distribution, the Parties shall agree in good faith on the allocation, taking into account the handling of comparable Liabilities under this Agreement.
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Section 2.02             Service Credit .

(a)             Service for Eligibility, Vesting and Benefit Purposes .  The SpinCo Benefit Plans shall, and SpinCo shall cause each member of the SpinCo Group to, recognize each SpinCo Group Employee’s and each Former SpinCo Group Employee’s full service with KAR or any of its Subsidiaries or predecessor entities at or before the Effective Time, to the same extent that such service was credited by KAR for similar purposes prior to the Effective Time as if such full service had been performed for a member of the SpinCo Group, for purposes of eligibility, vesting and determination of level of benefits under any such SpinCo Benefit Plan.

(b)             Evidence of Prior Service .  Notwithstanding anything in this Agreement to the contrary, but subject to Section 3.02 and applicable Law, upon reasonable request by either Party (the “ Requesting Party ”), the other Party (the “ Providing Party ”) will provide to the Requesting Party copies of any records available to the Providing Party to document the service, plan participation and membership of Former Employees of the Providing Party who are then Employees of the Requesting Party, and will cooperate with the Requesting Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any such Employee.

Section 2.03             Benefit Plans .

(a)              Establishment of Plans .  Before the Effective Time, SpinCo shall, or shall cause an applicable member of the SpinCo Group to, adopt Benefit Plans (and related trusts, if applicable), with terms comparable (or such other standard as is specified in this Agreement with respect to any particular Benefit Plan) to those of the corresponding KAR Benefit Plans.  The U.S. KAR Benefit Plans are listed on Schedule 2.03(a)(i) and the Canadian KAR Benefit Plans are listed on Schedule 2.03(a)(ii). SpinCo may limit participation in any such SpinCo Benefit Plan to SpinCo Group Employees and Former SpinCo Group Employees who participated in the corresponding KAR Benefit Plan immediately prior to the Effective Time. SpinCo shall, or shall cause an applicable member of the SpinCo Group to, adopt such other Benefit Plans as specified in this Agreement.

(b)              Information and Operation .  KAR shall provide SpinCo with information describing each KAR Benefit Plan election made by a SpinCo Group Employee or Former SpinCo Group Employee that may have application to SpinCo Benefit Plans from and after the Effective Time, and SpinCo shall use its commercially reasonable efforts to administer the SpinCo Benefit Plans using those elections. Each Party shall, upon reasonable request, and subject to any applicable privacy laws, provide the other Party and the other Party’s respective Affiliates, agents, and vendors all information reasonably necessary to the other Party’s operation or administration of its Benefit Plans.

(c)              No Diminution of Benefits .  Except as provided herein, during the General Continuation Period, SpinCo shall provide to each SpinCo Group Employee and Former SpinCo Group Employee employee benefits under SpinCo Benefit Plans that, in the aggregate, are substantially similar to the employee benefits provided to such employees immediately prior to the Effective Time. Notwithstanding the foregoing, during such period, SpinCo may make such changes, modifications or amendments to the applicable SpinCo Benefit Plan as may be required by applicable Law or as are necessary and appropriate to reflect the Separation.

(d)              No Duplication or Acceleration of Benefits.   Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, no participant in any SpinCo Benefit Plan shall receive service credit or benefits to the extent that receipt of such service credit or benefits would result in duplication of benefits provided to such participant by the corresponding KAR Benefit Plan or any other plan, program or arrangement sponsored or maintained by a member of the KAR Group. Furthermore, unless expressly provided for in this Agreement, the Separation and Distribution Agreement or in any Ancillary Agreement or required by applicable Law, no provision in this Agreement shall be construed to create any right to accelerate vesting or entitlements under any compensation or Benefit Plan, program or arrangement sponsored or maintained by a member of the KAR Group or member of the SpinCo Group on the part of any Employee or Former Employee.

(e)              No Expansion of Participation .  Unless otherwise expressly provided in this Agreement, as otherwise determined or agreed to by KAR and SpinCo, as required by applicable Law, or as explicitly set forth in a SpinCo Benefit Plan, a SpinCo Group Employee or Former SpinCo Group Employee shall be entitled to participate in the SpinCo Benefit Plans at the Effective Time only to the extent that such SpinCo Group Employee or Former SpinCo Group Employee was entitled to participate in the corresponding KAR Benefit Plan as in effect immediately prior to the Effective Time (to the extent that such SpinCo Group Employee or Former SpinCo Group Employee does not participate in the respective SpinCo Benefit Plan immediately prior to the Effective Time), it being understood that this Agreement does not expand (i) the number of SpinCo Group Employees or Former SpinCo Group Employees entitled to participate in any SpinCo Benefit Plan or (ii) the participation rights of SpinCo Group Employees or Former SpinCo Group Employees in any SpinCo Benefit Plans beyond the rights of such SpinCo Group Employees or Former SpinCo Group Employees under the corresponding KAR Benefit Plans, in each case, after the Effective Time.

(f)              Transition Services .  The Parties acknowledge that the KAR Group or the SpinCo Group may provide administrative services for certain of the other Party’s compensation and benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement. To the extent that any services that are required to be provided by a Party under this Agreement are instead provided by the other Party under the Transition Services Agreement, the obligation of the relevant Party to provide such services under this Agreement shall commence at the expiration of the transitional period for such services under the Transition Services Agreement.
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(g)              Beneficiaries .  References to KAR Group Employees, Former KAR Group Employees, SpinCo Group Employees, Former SpinCo Group Employees, and non-employee directors of either KAR or SpinCo (including Transferred Directors), shall be deemed to refer to their beneficiaries, dependents, survivors and alternate payees, as applicable.

Section 2.04            Individual Agreements .

(a)              Assignment by KAR .  To the extent permissible by the terms of any Individual Agreement and by applicable Law, KAR shall assign, or cause an applicable member of the KAR Group to assign, to SpinCo or another member of the SpinCo Group, as designated by SpinCo, all Individual Agreements, with such assignment to be effective as of the Effective Time.

(b)              Assumption by SpinCo.   To the extent permissible by the terms of any Individual Agreement and by applicable Law, SpinCo shall assume and honor, or cause a member of the SpinCo Group to assume and honor,  any Individual Agreement effective as of the Effective Time.

(c)              Enforcement Rights .

(i)              To the extent that assignment of any such Individual Agreement is not permitted by the terms of such agreement or by applicable Law, effective as of the Effective Time, each member of the SpinCo Group shall be considered, to the extent permitted by the terms of such Individual Agreement and applicable Law, to be a successor to each member of the KAR Group for purposes of, and a third−party beneficiary with respect to, such Individual Agreement, such that each member of the SpinCo Group shall enjoy all of the rights and benefits under such agreement (including rights and benefits as a third-party beneficiary), with respect to the business operations of the SpinCo Group; provided , however , that in no event shall KAR be permitted to enforce any Individual Agreement (including any restrictive covenants contained therein) against a SpinCo Group Employee or Former SpinCo Group Employee for action taken in such individual’s capacity as a SpinCo Group Employee or Former SpinCo Group Employee; and provided , further , that KAR shall only be permitted to enforce any Individual Agreement (including any restrictive covenants contained therein) on KAR’s own behalf for twenty-four (24) months following the Effective Time.

(ii)              To the extent that any such Individual Agreement is assigned to SpinCo or another member of the SpinCo Group, then each member of the KAR Group shall be considered, to the extent permitted by the terms of such Individual Agreement and applicable Law, to be a third-party beneficiary with respect to such Individual Agreement, such that each member of the KAR Group shall enjoy all of the rights and benefits under such agreement (including rights and benefits as a third-party beneficiary), with respect to the business operations of the KAR Group; provided , however , that in no event shall KAR be permitted to enforce any Individual Agreement (including any restrictive covenants contained therein) against a SpinCo Group Employee or Former SpinCo Group Employee for action taken in such individual’s capacity as a SpinCo Group Employee or Former SpinCo Group Employee; and provided , further , that KAR shall only be considered a third-party beneficiary with respect to any such Individual Agreement (including with respect to any restrictive covenants contained therein) for twenty-four (24) months following the Effective Time.

(d)             Notice .  SpinCo shall, or shall cause another member of the SpinCo Group to, provide notice to all SpinCo Employees whose Individual Agreement is assigned pursuant to this Section 2.04 to SpinCo or another member of the SpinCo Group of such assignment and of the KAR Group’s continued enforcement rights.

Section 2.05            Non-U.S. Jurisdictions .  Except as expressly set forth herein, the provisions of this Agreement shall apply in respect of all jurisdictions wherever situated; provided , however , that to the extent an Ancillary Agreement or an appendix attached hereto or a separation agreement between the Parties addresses employment, compensation and employee benefit matters, the terms of such Ancillary Agreement, appendix or separation agreement shall govern in respect of matters relating to employees employed in the applicable jurisdiction. KAR shall have the authority to adjust the treatment described in this Agreement (including any appendix attached hereto) or an Ancillary Agreement with respect to SpinCo Group Employees who are located outside of the United States in order to address different plans or benefits not addressed herein or to address applicable plans and benefits in a manner appropriate to the jurisdiction; ensure compliance with the applicable laws or regulations of countries outside of the United States; or to preserve the tax benefits provided under local tax law or regulation before the Distribution.

Section 2.06            Assignment and Assumption of Assets and Liabilities .

(a)             Effective as of the Distribution Date, KAR assigns all of KAR’s or any member of the KAR Group’s rights and obligations under any arrangements (and all Assets and Liabilities related thereto) that transfer to SpinCo in accordance with the terms of this Agreement, subject to the terms and conditions thereof, to SpinCo or, if applicable, the appropriate member of the SpinCo Group, and SpinCo or any such member of the SpinCo Group accepts such assignment and assumes such arrangements, and agrees to be bound by the terms and provisions contained therein.

(b)             Effective as of the Distribution Date, SpinCo assigns all of SpinCo’s or any member of the SpinCo Group’s rights and obligations under any arrangements (and all Assets and Liabilities related thereto) that transfer to KAR in accordance with the terms of this Agreement, subject to the terms and conditions thereof, to KAR or, if applicable, the appropriate member of the KAR Group, and KAR or any such member of the KAR Group accepts such assignment and assumes such arrangements, and agrees to be bound by the terms and provisions contained therein.

(c)             Each of the Parties shall execute and deliver such additional documents, instruments, conveyances and assurances, and take such further actions as may be reasonably required to carry out the provisions of this Section 2.06.

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ARTICLE III

ASSIGNMENT OF EMPLOYEES

Section 3.01            Active Employees .

(a)              Assignment and Transfer of Employees.   Immediately prior to the Effective Time, (i) the SpinCo Group and the applicable member of the KAR Group shall take such actions as are necessary to ensure that each SpinCo Group Employee employed by a member of the KAR Group is employed by a member of the SpinCo Group as of the Effective Time, and (ii) the KAR Group and the applicable member of the SpinCo Group shall take such actions as are necessary to ensure that each KAR Group Employee employed by a member of the SpinCo Group is employed by a member of the KAR Group as of the Effective Time.

(b)              At-Will Status.   Nothing in this Agreement shall create any obligation on the part of any member of the KAR Group or any member of the SpinCo Group to (i) continue the employment of any Employee or permit the return from a leave of absence for any period after the date of this Agreement (except as required by applicable Law) or (ii) change the employment status of any Employee from “at-will,” to the extent that such Employee is an “at-will” employee under applicable Law.

(c)              Severance.   The Parties acknowledge and agree that the Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 3.01 shall not be deemed an involuntary termination of employment entitling any SpinCo Group Employee or KAR Group Employee to severance payments or benefits, subject to the requirement of applicable Laws.

(d)              Not a Change of Control/Change in Control .  The Parties acknowledge and agree that neither the consummation of the Distribution nor any transaction contemplated by this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement shall be deemed a “change of control,” “change in control,” or term of similar import for purposes of any Benefit Plan sponsored or maintained by any member of the KAR Group or member of the SpinCo Group.
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ARTICLE IV

EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION

Section 4.01            Generally .  Each KAR Award granted that is outstanding as of immediately prior to the Effective Time shall be adjusted as described below; provided , however , that, effective immediately prior to the Effective Time, the KAR Compensation Committee may provide for different adjustments with respect to some or all KAR Awards to the extent that the KAR Compensation Committee deems such adjustments necessary and appropriate.  Any adjustments made by the KAR Compensation Committee pursuant to the foregoing sentence shall be deemed incorporated by reference herein as if fully set forth below and shall be binding on the Parties and their respective Affiliates.  Before the Effective Time, the SpinCo Long Term Incentive Plan shall be established, with such terms as are necessary to permit the implementation of the provisions of Section 4.02 . The adjustment or conversion of any KAR Award shall be effectuated in a manner that is intended to avoid the imposition of any penalty or other taxes on the holders thereof pursuant to Code Section 409A and, with respect to holders of KAR Awards who are Canadian taxpayers, in a manner consistent with the applicable conversion provisions of the Income Tax Act (Canada).

Section 4.02             Equity Incentive Awards .

(a)              Stock Options .

(i)              Conversion .  Each KAR Option which is outstanding immediately prior to the Effective Time will be converted or disposed of (collectively referred to as a conversion herein) immediately prior to the Effective Time into (or in exchange for) two separate options, an adjusted KAR Option and a SpinCo Option, as set forth below.  Conversion of any KAR Option which constitutes an incentive stock option shall be effected in a manner which complies with the requirements of Section 424 of the Code. The only consideration a holder of a KAR Option will receive for the conversion of any KAR Option is the adjusted KAR Option and the SpinCo Option, with the conversion subject to this Section 4.02 .

(A)              Number of Shares Subject to Options . The number   of KAR Shares subject to each of the adjusted KAR Options will be equal to the number of KAR Shares subject to the KAR Option immediately prior to the Effective Time.  The number of SpinCo Shares subject to the SpinCo Option will be equal to the number of KAR Shares subject to the KAR Option immediately prior to the Effective Time.

(B)              Exercise Price .  Unless otherwise determined by the KAR Compensation Committee prior to the Effective Time, the per share exercise price of the adjusted KAR Option shall be equal to the product of (1) the per share exercise price of the KAR Option immediately prior to the Effective Time multiplied by (2) a fraction, the numerator of which shall be the Opening KAR Stock Price (as defined below) and the denominator of which shall be the Closing KAR Stock Price (as defined below), which product shall be rounded up to the nearest whole cent.  The per share exercise price of the SpinCo Option shall be equal to the product of (1) the per share exercise price of the KAR Option immediately prior to the Effective Time multiplied by (2) a fraction, the numerator of which shall be the Opening SpinCo Stock Price (as defined below) and the denominator of which shall be the Closing KAR Stock Price, which product shall be rounded up to the nearest whole cent.  The “ Opening KAR Stock Price ” shall mean the per share closing trading price of KAR Shares, as traded on an ex-distribution basis on the last trading day immediately preceding the Distribution Date.  The “ Opening SpinCo Stock Price ” shall mean the per share closing “when-issued” trading price of SpinCo Shares on the last trading day immediately preceding the Distribution Date.  The “ Closing KAR Stock Price ” shall be the per share closing trading price of KAR Shares trading on the “regular way” basis on the last trading day immediately prior to the Distribution Date.

(C)              The Parties agree that the conversion of each KAR Option held by a Canadian taxpayer as described in this Section 4.02(a) is intended to occur on a tax-deferred basis under subsection 7(1.4) of the Income Tax Act (Canada) and the Parties shall make such adjustment to the foregoing as is required to qualify for such treatment, including, if it is determined in good faith that the aggregate “in the money amount” of any adjusted KAR Option and SpinCo Option immediately after the conversion would otherwise exceed the “in the money amount” of the KAR Option immediately prior to the conversion, but only to the extent necessary and in a manner that does not otherwise adversely affect the holder of the KAR Option.

(ii)              Option Terms .

(A)              Terms and Conditions .  Each adjusted KAR Option shall be subject to the same terms and conditions regarding term, vesting, and other provisions regarding exercise as set forth in the original KAR Option, except as set forth below.  Each SpinCo Option issued pursuant to this Section 4.02(a) shall be subject to the same terms and conditions regarding term, vesting, and other provisions regarding exercise as set forth in the related KAR Option before the Effective Time, except as set forth below.

(B)              Exercise; Withholding .  Upon the exercise of a SpinCo Option, whether by a KAR Group Employee or a SpinCo Group Employee, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) SpinCo in accordance with the terms of the option, and SpinCo shall be solely responsible for the issuance of SpinCo Shares in respect of such exercise, for ensuring the withholding of all applicable Employment Tax on behalf of the employing entity of such holder, and for ensuring the remittance of such Employment Taxes to the employing entity of such holder.  Upon the exercise of a KAR Option, whether by a KAR Group Employee or a SpinCo Group Employee, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) KAR in accordance with the terms of the KAR Option, and KAR shall be solely responsible for the issuance of KAR Shares, for ensuring the withholding of all applicable Employment Tax on behalf of the employing entity of such holder and for ensuring the remittance of such Employment Taxes to the employing entity of such holder.
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(b)              PRSUs .

(i)              17/18 KAR PRSU Conversion .  Each KAR PRSU granted in 2017 and 2018 (the “ 17/18 KAR PRSU ”) which is outstanding immediately prior to the Effective Time will be converted immediately prior to the Effective Time to a time-vested KAR RSU and as of the Effective Time shall be treated in accordance with Section 4.02(c) below.  The number of KAR Shares subject to such KAR RSU immediately prior to the Effective Time shall be equal to the target number of KAR Shares underlying the applicable KAR PRSU. Following the Effective Time, the KAR RSUs resulting from the conversion of the 17/18 KAR PRSUs shall remain subject to substantially the same terms and conditions as applicable to the 17/18 KAR PRSU prior to the Effective Time; provided , however that from and after the Effective Time no further performance-based vesting shall apply and the vesting of such KAR RSU shall be determined based solely upon the holder’s continued services with KAR or SpinCo, as applicable, through the third anniversary of the grant date of the applicable award, with such additional terms and conditions as may be determined by the applicable Compensation Committee.

(ii)              19 KAR PRSU Conversion .  Each KAR PRSU granted in 2019 which is outstanding immediately prior to the Effective Time will be converted upon the Effective Time into two separate performance restricted stock units, an adjusted KAR PRSU (the “ 19 KAR PRSU ”) relating to KAR Shares and an adjusted SpinCo PRSU (the “ 19 SpinCo PRSU ”) relating to SpinCo Shares, as set forth below.

(A)              19 KAR PRSU Terms and Conditions .  The number of KAR Shares subject to each 19 KAR PRSU will be equal to the number of KAR Shares subject to the KAR PRSU.  The 19 KAR PRSU shall be subject to the same terms and conditions as were applicable to the KAR PRSU immediately prior to the Effective Time, except that the performance-based vesting criteria shall be adjusted as determined by the KAR Compensation Committee and shall apply to the 2019 performance year only, with only service-based vesting to be applicable through the third anniversary of the grant date of the applicable award, with such additional terms and conditions as may be determined by the KAR Compensation Committee.

(B)              19 SpinCo PRSU Terms and Conditions .  The number of SpinCo Shares subject to each 19 SpinCo PRSU will be equal to the number of KAR Shares subject to the corresponding 19 KAR PRSU.  Each SpinCo PRSU shall be subject to the same terms and conditions as were applicable to the KAR PRSU immediately prior to the Effective Time, except that the performance-based vesting criteria shall be adjusted as determined by the KAR Compensation Committee and shall apply to the 2019 performance year only, with only service-based vesting to be applicable through the third anniversary of the grant date of the applicable award, with such additional terms and conditions as may be determined by the SpinCo Compensation Committee.

(c)              RSUs .

(i)              Conversion . Upon the Effective Time, each holder of a KAR RSU which is outstanding immediately prior to the Effective Time (including (1) KAR RSUs resulting from the conversion of 17/18 KAR PRSUs described in Section 4.02(b)(i) hereof and (2) KAR RSUs held pursuant to the KAR Director Plan) will continue to hold such KAR RSU and will, in addition thereto, receive a SpinCo RSU with respect to a number of SpinCo Shares equal to the number of KAR Shares subject to the corresponding KAR RSU immediately prior to the Effective Time.

(ii)              RSU Terms and Conditions .  Each KAR RSU shall be subject to the same terms and conditions as set forth in the original KAR RSU, except as set forth below.  Each SpinCo RSU issued pursuant to this Section 4.02(c) shall be subject to the same terms and conditions as set forth in the related KAR RSU before the Effective Time, except as set forth below.

(d)              Director Restricted Stock.

(i)              Conversion .  Upon the Effective Time, each holder of a KAR Restricted Stock Award which is outstanding immediately prior to the Effective Time will continue to hold such KAR Restricted Stock Award and will, in addition thereto, receive a SpinCo Restricted Stock Award with respect to a number of SpinCo Shares equal to the number of KAR Shares subject to the corresponding KAR Restricted Stock Award immediately prior to the Effective Time.

(ii)              Restricted Stock Terms and Conditions .  Each KAR Restricted Stock Award shall be subject to the same terms and conditions as set forth in the original KAR Restricted Stock Award, except as set forth below.  Each SpinCo Restricted Stock Award issued pursuant to this Section 4.02(d) shall be subject to the same terms and conditions as set forth in the related KAR Restricted Stock Award before the Effective Time, except as set forth below.
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(e)              PRSU/RSU/Restricted Stock Delivery; Withholding .  SpinCo shall be solely responsible for the issuance of SpinCo Shares in respect of SpinCo RSUs and SpinCo Restricted Stock Awards and SpinCo PRSUs (in each case, regardless of the holder thereof), for ensuring the withholding of all applicable Employment Tax on behalf of the employing or service entity of such holder, and for ensuring the remittance of such Employment Taxes (if applicable) to the employing or service entity of such holder.  KAR shall be solely responsible for the issuance of KAR Shares in respect of KAR RSUs and KAR Restricted Stock Awards and KAR PRSUs (in each case, regardless of the holder thereof), for ensuring the withholding of all applicable Employment Tax on behalf of the employing or service entity of such holder, and for ensuring the remittance of such Employment Taxes (if applicable) to the employing or service entity of such holder.  SpinCo shall be solely responsible for the payment of cash in respect of KAR RSUs, KAR Restricted Stock Awards, KAR PRSUs, SpinCo RSUs, SpinCo Restricted Stock Awards, and SpinCo PRSUs held by SpinCo Service Providers, for ensuring the withholding of all applicable Employment Tax, and for ensuring the remittance of such Employment Taxes to the applicable governmental authority.  KAR shall be solely responsible for the payment of cash in respect of KAR RSUs, KAR Restricted Stock Awards, KAR PRSUs, SpinCo RSUs, SpinCo Restricted Stock Awards, and SpinCo PRSUs held by KAR Service Providers, for ensuring the withholding of all applicable Employment Tax, and for ensuring the remittance of such Employment Taxes to the applicable governmental authority.  Any forfeited SpinCo RSUs, SpinCo Restricted Stock Awards or SpinCo PRSUs will be forfeited to SpinCo and any forfeited KAR RSUs, KAR Restricted Stock Awards or KAR PRSUs will be forfeited to KAR (regardless of the employer of the holder thereof).

(f)              PRSU/RSU Dividend Equivalents .  Holders of SpinCo RSUs and SpinCo PRSUs who have a right to receive dividend equivalents with respect to SpinCo Shares underlying such award, will accrue such dividend equivalents and be paid by SpinCo to holders who are SpinCo Group Employees or KAR Group Employees, in each case on the payment date of the related SpinCo RSUs or SpinCo PRSUs (subject to the award vesting on such date); provided , however , that any interest payments that are payable with respect to such dividend equivalents will be sole responsibility of SpinCo for holders who are SpinCo Group Employees and KAR for holders who are KAR Group Employees.  Holders of KAR RSUs and KAR PRSUs who have a right to receive dividend equivalents with respect to KAR Shares underlying such award, will accrue such dividend equivalents and be paid by KAR to holders who are SpinCo Group Employees or KAR Group Employees, in each case on the payment date of the related KAR RSUs or KAR PRSUs (subject to the award vesting on such date); provided , however , that any interest payments that are payable with respect to such dividend equivalents will be sole responsibility of SpinCo for holders who are SpinCo Group Employees and KAR for holders who are KAR Group Employees.   Notwithstanding the foregoing, if the terms of the applicable awards provide that dividend equivalent rights shall increase the amount of shares subject to the award by the fair market value of any dividend, then KAR shall issue such additional shares with respect to KAR RSUs and KAR PRSUs and SpinCo shall issue such additional shares with respect to SpinCo RSUs and SpinCo PRSUs, in each case without regard to whether such awards are held by KAR Group Employees or SpinCo Group Employees.

(g)              Service .  Notwithstanding the foregoing, KAR will take such action as is necessary to ensure that with respect to KAR Awards that are held by SpinCo Service Providers as of and following the Effective Time, such individuals will not incur a termination of employment or service as a result of the Distribution for purposes of the KAR Awards.  SpinCo will take such action as is necessary to ensure that with respect to the SpinCo Awards that are held by KAR Service Providers as of and following the Effective Time, such individuals will not incur a termination of employment or service as a result of the Distribution for purposes of the SpinCo Awards.  For purposes of the vesting and termination provisions of the KAR Awards and the SpinCo Awards, continued service with a KAR Group member or a SpinCo Group member, as the case may be, shall be considered to be continued service for purposes of such award.

(h)              Change in Control .  Following the Distribution Date, for any award under this Section 4.02 , any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or KAR Equity-Based Plans applicable to such award (i) with respect to KAR Awards, shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, employment agreement or KAR Equity-Based Plans (a “ KAR Change of Control ”), and (ii) with respect to SpinCo Awards, shall be deemed to refer to a “Change in Control” as defined in the SpinCo Long Term Incentive Plan (a “ SpinCo Change of Control ”).  Without limiting the foregoing, with respect to provisions related to vesting of awards, a KAR Change of Control shall be treated as a SpinCo Change of Control for purposes of SpinCo Awards held by KAR Service Providers, and a SpinCo Change of Control shall be treated as a KAR Change of Control for purposes of KAR Awards held by SpinCo Service Providers.

(i)              Allocation of Tax Deduction .  The Equity Award Deduction in respect of equity based awards held by KAR Service Providers (whether with respect to KAR Shares or SpinCo Shares) will be allocated to KAR.  The Equity Award Deduction in respect of equity based awards held by SpinCo Service Providers as a result of the operation of this Section 4.02 (whether with respect to KAR Shares or SpinCo Shares) will be allocated to SpinCo.

(j)              Partial Interests in Shares .  Except with respect to any fractional interest in a Restricted Stock Award, which shall be treated in accordance with Section 3.4 of the Separation and Distribution Agreement , each interest in a fractional KAR Share with respect to any KAR Award that is held by a KAR Service Provider or a SpinCo Service Provider and that is outstanding immediately prior to the Effective Time shall remain outstanding and, to the extent administratively practicable, shall be subject to the adjustment set forth in this Section 4.02 in the same manner as a whole KAR Share.

(k)              Administration .  Each of KAR and SpinCo shall establish an appropriate administration system in order to handle exercises and delivery of shares in an orderly manner and provide reasonable levels of service for equity award holders.

(l)              No Effect on Subsequent Awards .  The provisions of this Section 4.02 shall have no effect on the terms and conditions of equity and equity-based awards granted following the Effective Time by KAR or SpinCo.
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(m)              Employee Stock Purchase Plan .

(i)              The administrator of the KAR Group Employee Stock Purchase Plan (the “ KAR ESPP ”) shall take all actions necessary and appropriate to provide that: (1) the Option Period (as defined in the KAR ESPP) during which the Record Date is to occur shall end at a reasonable time before the Record Date to allow participants to purchase KAR Shares under the KAR ESPP prior to the Record Date; (2) participant payroll deductions and other contributions by SpinCo Group Service Providers under the KAR ESPP shall cease on or before the Record Date described in clause (1) of this paragraph; (3) SpinCo Group Employees in the KAR ESPP shall not be eligible to participate in any future Option Periods that begin following the Record Date; (4) any cash remaining in the KAR ESPP account of any SpinCo Group Employee described in clause (3) shall be refunded to such SpinCo Group Employee without interest as soon as administratively practicable; and (5) the next following Option Period shall be established by the administrator of the KAR ESPP in its sole discretion.

(ii)              Unless otherwise determined by the SpinCo Board, effective as of or before the Distribution Date, SpinCo shall establish the SpinCo Group Employee Stock Purchase Plan, with terms substantially similar to those of the KAR ESPP as of the Distribution Date.

(n)              Registration and Other Regulatory Requirements .  SpinCo agrees to file applicable registration statements with respect to, and to cause to be registered pursuant to the Securities Act, the SpinCo Shares authorized for issuance under the SpinCo Long Term Incentive Plan, as required pursuant to the Securities Act, before the date of issuance of any SpinCo Shares pursuant to the SpinCo Long Term Incentive Plan.  The Parties shall take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of this Section 4.02(n) , including compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions.

Section 4.03            Non-Equity Incentive Plans .

(a)              Allocation of Liabilities.  The KAR Group shall be solely responsible for funding, paying and discharging all obligations relating to the 2019 annual incentive bonus awards under the applicable KAR Benefit Plans in which short−term incentive compensation is provided with respect to payments earned before, as of or after the Effective Time by KAR Group Employees or Former KAR Group Employees, and no member of the SpinCo Group shall have any obligations with respect thereto.  The SpinCo Group shall be solely responsible for funding, paying and discharging all obligations relating to the 2019 annual incentive bonus awards under the applicable KAR Benefit Plans in which short−term incentive compensation is provided with respect to payments earned before, as of or after the Effective Time by SpinCo Group Employees or Former SpinCo Group Employees, and no member of the KAR Group shall have any obligations with respect thereto.

(b)              Transfer of Accruals .  As soon as practicable following the Distribution, KAR shall transfer to SpinCo the applicable KAR Benefit Plan accruals in respect of SpinCo Group Employees and Former SpinCo Group Employees for the portion of the 2019 performance period that occurs prior to the Distribution, based on the level of accrual as of the Effective Time.

Section 4.04            Director Compensation .

(a)              Establishment of SpinCo Outside Directors’ Compensation Plan .  Before the Effective Time, SpinCo shall, as it deems appropriate, establish an outside directors’ compensation program for each SpinCo non−employee director as of the Effective Time who served on the KAR Board immediately prior to the Effective Time but who will no longer serve on the KAR Board following the Effective Time (a “ Transferred Director ”).  As of the Effective Time, KAR shall cease to have any Liability to any such Transferred Director under the KAR outside directors’ compensation program.

(b)              Other Liabilities .  Except as provided in Section 4.04(a) , KAR shall retain all other Liabilities and Assets relating to KAR non-employee director compensation.

(c)              Director Compensation.  KAR shall be responsible for the payment of any fees for service on the KAR Board that are earned at, before, or after the Effective Time, and SpinCo shall not have any responsibility for any such payments.  With respect to any SpinCo non-employee director, SpinCo shall be responsible for the payment of any fees for service on the SpinCo Board that are earned at any time after the Effective Time and KAR shall not have any responsibility for any such payments.  Notwithstanding the foregoing, SpinCo shall commence paying quarterly cash retainers to SpinCo non-employee directors in respect of the quarter in which the Effective Time occurs; provided that (i) if KAR has already paid such quarter’s cash retainers to KAR non-employee directors prior to the Effective Time, then within 30 days after the Distribution Date, SpinCo will pay KAR an amount equal to the portion of such payment that is attributable to Transferred Directors’ service to SpinCo after the Distribution Date, and (ii) if KAR has not yet paid such quarter’s cash retainers to KAR non-employee directors prior to the Effective Time, then within 30 days after the Distribution Date, KAR will pay SpinCo an amount equal to the portion of such payment that is attributable to Transferred Directors’ service to KAR on and prior to the Distribution Date.  KAR Awards held by non-employee directors as of immediately prior to the Effective Time shall be treated as described in Section 4.02 .
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ARTICLE V

U.S. QUALIFIED RETIREMENT PLANS

Section 5.01            SpinCo U.S. Savings Plan .

(a)              Establishment of Plan.   Before the Effective Time, SpinCo shall provide KAR with (i) a copy of the SpinCo Savings Plan and (ii) a copy of certified resolutions of the SpinCo Board (or its authorized committee or other delegate) evidencing adoption of the SpinCo Savings Plan and the related trust(s) and the assumption by the SpinCo Savings Plan of the liabilities described in Section 5.01(b) .

(b)              Transfer of Account Balances .  Not later than 30 days following the Distribution Date (or such later time as mutually agreed by the Parties), KAR shall cause the trustee of the KAR Savings Plan to transfer from the trust(s) which forms a part of the KAR Savings Plan to the trust(s) which forms a part of the SpinCo Savings Plan the account balances of the SpinCo Group Employees and Former SpinCo Group Employees under the KAR Savings Plan, determined as of the date of the transfer. Such transfers shall be made in kind, including promissory notes evidencing the transfer of outstanding loans.  Any asset and liability transfers pursuant to this Section 5.01(b) shall comply in all respects with Sections 414(l) and 411(d)(6) of the Code.

(c)              SpinCo Savings Plan Provisions .  The SpinCo Savings Plan shall provide that:

(i)              SpinCo Group Employees and Former SpinCo Group Employees shall (A) be eligible to participate in the SpinCo Savings Plan as of the Effective Time to the extent that they were eligible to participate in the KAR Savings Plan as of immediately prior to the Effective Time, and (B) receive credit for purposes of eligibility and vesting for all service credited for those purposes under the KAR Savings Plan as of immediately prior to the Distribution Date as if that service had been rendered to SpinCo; and

(ii)              the account balance of each SpinCo Group Employee and Former SpinCo Group Employee under the KAR Savings Plan as of the date of the transfer of assets from the KAR Savings Plan (including any outstanding promissory notes) shall be credited to such individual’s account balance under the SpinCo Savings Plan.

(d)              KAR Savings Plan after Effective Time .  From and after the Effective Time, (i) the KAR Savings Plan shall continue to be responsible for liabilities in respect of KAR Group Employees and Former KAR Group Employees, and (ii) no SpinCo Group Employees or Former SpinCo Group Employees shall accrue any benefits under the KAR Savings Plan.  Without limiting the generality of the foregoing, SpinCo Group Employees and Former SpinCo Group Employees shall cease to be participants in the KAR Savings Plan effective as of the Effective Time.

(e)              Plan Fiduciaries .  For all periods after the Effective Time, the Parties agree that the applicable fiduciaries of each of the KAR Savings Plan and the SpinCo Savings Plan, respectively, shall have the authority with respect to the KAR Savings Plan and the SpinCo Savings Plan, respectively, to determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents.

(f)              No Loss of Unvested Benefits; No Distributions .  The transfer of any SpinCo Group Employee’s employment to the SpinCo Group will not result in loss of that SpinCo Group Employee’s unvested benefits (if any) under the KAR Savings Plan, which benefit liability will be assumed under the SpinCo Savings Plan as provided herein.  No SpinCo Group Employee shall be entitled to a distribution of his or her benefit under the KAR Savings Plan or SpinCo Savings Plan as a result of such transfer of employment.
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ARTICLE VI

DIRECTOR DEFERRED COMPENSATION PLAN

Section 6.01            KAR . As of the Effective Time, KAR shall retain, and remain the sponsor of, the KAR Directors Deferred Compensation Plan (the “ KAR Director Plan ”).

Section 6.02            SpinCo .

(a)              As of the Effective Time, SpinCo shall adopt a new nonqualified deferred compensation plan (the “ SpinCo Director Plan ”). All Transferred Directors who participated in the KAR Director Plan immediately prior to the Effective Time shall be eligible to participate in the SpinCo Director Plan to the same extent that such Transferred Director participated in the KAR Director Plan prior to the Effective Time (the “ Covered Participants ”). The SpinCo Director Plan shall assume the obligations of the KAR Director Plan with respect to the Covered Participants whether such benefits accrued before, on or after the Effective Time.

(b)              Transfer of  Liabilities . KAR shall cause the actuary of the KAR Director Plan to determine the proportional share of Liabilities relating to the Covered Participants to be transferred to the SpinCo Director Plan, respectively.

(c)              Identified Errors . If any error with respect to a transfer of Liabilities required under this Section 6.02 is identified after the date on which the transfer was to occur, the Parties shall cooperate to effect the transfer as of the date when the transfer was to occur.

(d)              Obligations and Liabilities .

(i)              At and after the Effective Time, SpinCo shall be solely and exclusively responsible for all obligations and Liabilities with respect to, or in any way related to, the SpinCo Director Plan, whether accrued before, at or after the Effective Time.

(ii)              At and after the Effective Time, KAR shall be solely and exclusively responsible for all obligations and Liabilities in respect of participants who are not Covered Participants with respect to, or in any way related to, the KAR Director Plan, whether accrued before, at or after the Effective Time.
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ARTICLE VII

WELFARE BENEFIT PLANS

Section 7.01            Welfare Plans .

(a)              Waiver of Conditions; Benefit Maximums .  SpinCo shall use commercially reasonable efforts to cause the SpinCo Welfare Plans to:

(i)              with respect to initial enrollment as of the Effective Time, waive (A) all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any SpinCo Group Employee or Former SpinCo Group Employee, other than limitations that were in effect with respect to the SpinCo Group Employee or Former SpinCo Group Employee under the applicable KAR Welfare Plan as of immediately prior to the Effective Time, and (B) any waiting period limitation or evidence of insurability requirement applicable to a SpinCo Group Employee or Former SpinCo Group Employee other than limitations or requirements that were in effect with respect to such SpinCo Group Employee or Former SpinCo Group Employee under the applicable KAR Welfare Plans as of immediately prior to the Effective Time; and

(ii)              take into account (A) with respect to aggregate annual, lifetime, or similar maximum benefits available under the SpinCo Welfare Plans, a SpinCo Group Employee’s or Former SpinCo Group Employee’s prior claim experience under the KAR Welfare Plans and any Benefit Plan that provides leave benefits; and (B) any eligible expenses incurred by a SpinCo Group Employee or Former SpinCo Group Employee and his or her covered dependents during the portion of the plan year of the applicable KAR Welfare Plan ending as of the Effective Time to be taken into account under such SpinCo Welfare Plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such SpinCo Group Employee or Former SpinCo Group Employee and his or her covered dependents for the applicable plan year to the same extent as such expenses were taken into account by KAR for similar purposes prior to the Effective Time as if such amounts had been paid in accordance with such SpinCo Welfare Plan.

(b)              U.S. Health Savings Accounts .  Prior to January 1, 2020, SpinCo shall, or shall cause a member of the SpinCo Group to, establish a SpinCo Welfare Plan that will provide health savings account benefits to SpinCo Group Employees on and after January 1, 2020.

(c)              U.S. Flexible Spending Accounts . Prior to January 1, 2020, SpinCo shall, or shall cause a member of the SpinCo Group to, establish a SpinCo Welfare Plan that will provide health or dependent care flexible spending account benefits to SpinCo Group Employees on and after January 1, 2020.

(d)              Allocation of Welfare Assets and Liabilities .  Effective as of the Effective Time, the SpinCo Group shall assume all Liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by or on behalf of SpinCo Group Employees or Former SpinCo Group Employees or their covered dependents under the KAR Welfare Plans or SpinCo Welfare Plans before, at, or after the Effective Time. No KAR Welfare Plan shall provide coverage to any SpinCo Group Employee or Former SpinCo Group Employee after the Effective Time, except as may be agreed between the Parties to address Employees who are on approved leaves of absence immediately prior to the Effective Time.

Section 7.02             U.S. COBRA and HIPAA .  The KAR Group shall continue to be responsible for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the KAR Welfare Plans with respect to any KAR Group Employees and any Former KAR Group Employees (and their covered dependents) who incur a qualifying event under COBRA before, as of, or after the Effective Time.  Effective as of the Effective Time, the SpinCo Group shall assume responsibility for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the SpinCo Welfare Plans with respect to any SpinCo Group Employees or Former SpinCo Group Employees (and their covered dependents) who incur a qualifying event or loss of coverage under the KAR Welfare Plans and/or the SpinCo Welfare Plans before, as of, or after the Effective Time.  The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.
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Section 7.03            Vacation, Holidays and Leaves of Absence .  Effective as of the Effective Time, the SpinCo Group shall assume all Liabilities of the KAR Group with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each SpinCo Group Employee. The KAR Group shall retain all Liabilities with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each KAR Group Employee.

Section 7.04             Severance and Unemployment Compensation .  Effective as of the Effective Time, the SpinCo Group shall assume any and all Liabilities to, or relating to, SpinCo Group Employees and Former SpinCo Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time.  The KAR Group shall be responsible for any and all Liabilities to, or relating to, KAR Group Employees and Former KAR Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time.

Section 7.05             Workers’ Compensation .  With respect to claims for workers’ compensation, (a) the SpinCo Group shall be responsible for all claims and Liabilities in respect of SpinCo Group Employees and Former SpinCo Group Employees, whether occurring before, at or after the Effective Time and the SpinCo Group shall be fully responsible for the administration, management and payment of all such claims and for the satisfaction of all such Liabilities, and (b) the KAR Group shall be responsible for all claims and Liabilities in respect of KAR Group Employees and Former KAR Group Employees, whether occurring before, at or after the Effective Time and the KAR Group shall be fully responsible for the administration, management and payment of all such claims and for the satisfaction of all such Liabilities.  Notwithstanding the foregoing, if the SpinCo Group is unable to assume any such Liability or the administration, management or payment of any such claim solely because of the operation of applicable Law, the KAR Group shall retain such Liabilities and the SpinCo Group shall reimburse and otherwise fully indemnify the KAR Group for all such Liabilities, including the costs of administering the plans, programs or arrangements under which any such Liabilities have accrued or otherwise arisen.

Section 7.06            Insurance Contracts .  To the extent that any KAR Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, the Parties will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for SpinCo (except to the extent that changes are required under applicable state insurance Laws or filings by the respective insurers) and to maintain any pricing discounts or other preferential terms for both KAR and SpinCo for a reasonable term.  Neither Party shall be liable for failure to obtain such insurance contracts, pricing discounts, or other preferential terms for the other Party.  Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.06 .

Section 7.07            Third-Party Vendors .  To the extent that any KAR Welfare Plan is administered by a third-party vendor, the Parties will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for SpinCo and to maintain any pricing discounts or other preferential terms for both KAR and SpinCo for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.07 .

Section 7.08            SpinCo Retained Welfare Plans .  As of the Effective Time, the SpinCo Group shall retain sponsorship of the Welfare Plans listed on Schedule 7.08 (the “ SpinCo Retained Welfare Plans ”), and, from and after the Effective Time, all Liabilities under the SpinCo Retained Welfare Plans shall be Liabilities of the SpinCo Group.
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ARTICLE VIII

NON-U.S. EMPLOYEES

Section 8.01            General . Notwithstanding anything in this Agreement to the contrary, all actions taken with respect to non-U.S. Employees or U.S. Employees working in non-U.S. jurisdictions shall be subject to and accomplished in accordance with applicable Law in the custom of the applicable jurisdictions.

ARTICLE IX

MISCELLANEOUS

Section 9.01            Employee Records .

(a)              Sharing of Information.   Subject to any limitations imposed by applicable Law, KAR and SpinCo (acting directly or through members of the KAR Group or the SpinCo Group, respectively) shall provide to the other and their respective authorized agents and vendors all information necessary for the Parties to perform their respective duties under this Agreement.

(b)              Transfer of Personnel Records and Authorization .  Subject to any limitation imposed by applicable Law and to the extent that it has not done so before the Effective Time, KAR shall transfer to SpinCo any and all employment records (including any Form I-9, Form W-2 or other IRS forms) with respect to SpinCo Group Employees and Former SpinCo Group Employees and other records reasonably required by SpinCo to enable SpinCo properly to carry out its obligations under this Agreement.  Such transfer of records generally shall occur as soon as administratively practicable at or after the Effective Time.  Each Party will permit the other Party reasonable access to Employee records, to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder.

(c)              Access to Records.   To the extent not inconsistent with this Agreement, the Separation and Distribution Agreement or any applicable privacy protection Laws or regulations, reasonable access to Employee-related records after the Effective Time will be provided to members of the KAR Group and members of the SpinCo Group pursuant to the terms and conditions of Article VI of the Separation and Distribution Agreement.

(d)              Maintenance of Records.  With respect to retaining, destroying, transferring, sharing, copying and permitting access to all Employee-related information, KAR and SpinCo shall comply with all applicable Laws, regulations and internal policies, and shall indemnify and hold harmless each other from and against any and all Liability, claims, actions, and damages that arise from a failure (by the indemnifying Party or its Subsidiaries or their respective agents) to so comply with all applicable Laws, regulations and internal policies applicable to such information.

(e)              Cooperation.   Each Party shall use commercially reasonable efforts to cooperate and work together to unify, consolidate and share (to the extent permissible under applicable privacy/data protection laws) all relevant documents, resolutions, government filings, data, payroll, employment and benefit plan information on regular timetables and cooperate as needed with respect to (i) any litigation with respect to any employee benefit plan, policy or arrangement contemplated by this Agreement (except to the extent such other Party is an opposing party in such litigation), (ii) efforts to seek a determination letter, private letter ruling or advisory opinion from the IRS or U.S. Department of Labor or any other Governmental Authority on behalf of any employee benefit plan, policy or arrangement contemplated by this Agreement, and (iii) any filings that are required to be made or supplemented to the IRS, U.S. Pension Benefit Guaranty Corporation, U.S. Department of Labor or any other Governmental Authority; provided , however , that requests for cooperation must be reasonable and not interfere with daily business operations.

(f)              Confidentiality.   Notwithstanding anything in this Agreement to the contrary, all confidential records and data relating to Employees to be shared or transferred pursuant to this Agreement shall be subject to Section 6.9 of the Separation and Distribution Agreement and the requirements of applicable Law.

Section 9.02             Preservation of Rights to Amend .  The rights of each member of the KAR Group and each member of the SpinCo Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.
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Section 9.03            Fiduciary Matters .  KAR and SpinCo each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard.  Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

Section 9.04            Further Assurances .  Each Party hereto shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party hereto may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby.

Section 9.05            Counterparts; Entire Agreement; Corporate Power .

(a)              This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b)              This Agreement and the Schedules and appendices hereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c)              KAR represents on behalf of itself and, to the extent applicable, each of its Subsidiaries, and SpinCo represents on behalf of itself and, to the extent applicable, each of its Subsidiaries, as follows:

(i)              each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

(ii)              this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.

(d)              Each Party acknowledges that it and each other Party is executing this Agreement by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement.  Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

Section 9.06            Governing Law .  This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of Laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 9.07            Assignability .  The assignability provisions set forth in Section 10.3 of the Separation and Distribution Agreement shall apply to this Agreement.
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Section 9.08            Third-Party Beneficiaries .  The provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder.  There are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any third party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.  Nothing in this Agreement is intended to amend any employee benefit plan or affect KAR’s, SpinCo’s or the applicable plan sponsor’s right to amend or terminate any employee benefit plan pursuant to the terms of such plan.  The provisions of this Agreement are solely for the benefit of the Parties, and no Employee or Former Employee, officer, director, or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement.

Section 9.09            Notices .  All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by electronic mail (for which a confirmation email is obtained), or sent by overnight courier (providing proof of delivery) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.09 ):

 
If to KAR, to:
     
   
KAR Auction Services, Inc.
   
13085 Hamilton Crossing Boulevard
   
Carmel, Indiana 46032
   
Email:
becca.polak@karauctionservices.com
   
Attention:
Chief Legal Officer
   
 
with a copy (prior to the Effective Time) to:
     
   
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Email:
Sean.Doyle@skadden.com
     
Gregory.Fernicola@skadden.com
     
Dwight.Yoo@skadden.com
   
Attention:
Sean C. Doyle
     
Gregory A. Fernicola
     
Dwight S. Yoo
   
 
If to SpinCo, to:
     
   
Insurance Auto Auctions, Inc.
   
Two Westbrook Corporate Center, Suite 500
   
Westchester, Illinois 60154
   
Email:
jkett@iaai.com
     
skerley@iaai.com
   
Attention:
John Kett
     
Sidney Peryar
   
 
with a copy (prior to the Effective Time) to:
     
   
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Email:
Sean.Doyle@skadden.com
     
Gregory.Fernicola@skadden.com
     
Dwight.Yoo@skadden.com
   
Attention:
Sean C. Doyle
     
Gregory A. Fernicola
     
Dwight S. Yoo

Any Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 9.10            Severability .  If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of any such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.
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Section 9.11             Force Majeure .  The Force Majeure provision set forth in Section 10.7 of the Separation and Distribution Agreement shall apply to this Agreement.

Section 9.12             Headings .  The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.13            Survival of Covenants .  Except as expressly set forth in this Agreement, the covenants, representations and warranties and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect thereafter.

Section 9.14            Waivers of Default .  Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 9.15            Dispute Resolution .  The dispute resolution procedures set forth in Article VII of the Separation and Distribution Agreement shall apply to any dispute, controversy or claim arising out of or relating to this Agreement.

Section 9.16            Specific Performance .  Subject to Article VII of the Separation and Distribution Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties.

Section 9.17            Amendments .  No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 9.18            Interpretation .  In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules hereto and thereto) and not to any particular provision of this Agreement; (c) Article, Section and Schedule references are to the Articles, Sections and Schedules to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or New York, New York; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to June 27, 2019.

Section 9.19            Limitations of Liability .  Notwithstanding anything in this Agreement to the contrary, neither SpinCo or any member of the SpinCo Group, on the one hand, nor KAR or any member of the KAR Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

Section 9.20            Mutual Drafting .  This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.

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IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be executed by their duly authorized representatives.

 
KAR AUCTION SERVICES, INC.
       
 
By:
/s/ Eric M. Loughmiller
   
Name:
Eric M. Loughmiller
   
Title:
Executive Vice President and Chief Financial Officer
       
 
IAA, INC.

 
By:
   /s/ John W. Kett
   
Name:
John W. Kett
   
Title:
Chief Executive Officer and President


Exhibit 99.1

PRESS   RELEASE


FOR IMMEDIATE RELEASE

KAR Completes Spin-off of IAA Salvage Auction Business

CARMEL, Ind. – June 28 , 2019 – KAR Auction Services Inc. (NYSE: KAR), a global automotive remarketing and technology services provider, announced today that it successfully completed its previously announced separation of IAA, Inc. (“IAA”). IAA is now an independent public company, trading on the New York Stock Exchange under the ticker symbol “IAA.” In early 2018, KAR announced the proposed separation with the goals of increasing shareholder value and allowing each company greater flexibility to accelerate its distinct strategic priorities. KAR will continue to focus on its auction marketplaces and has made meaningful investments and acquisitions to bolster its digital, data analytical and technology capabilities while expanding the company’s international footprint.

“Today marks the beginning of a new era for KAR and our investors, employees and diverse customers around the globe,” said Jim Hallett, KAR chairman and CEO. “KAR’s strong, focused strategy positions us well to lead the digital evolution of our industry and expand our broad portfolio of innovative, integrated and data-driven solutions. We look forward to seizing the many opportunities ahead, advancing our entrepreneurial culture, and upholding our historical commitment to customer service.”

KAR will continue to operate its physical, online and digital whole car auction marketplaces and offer a broad scope of ancillary and related services, including dealer floorplan financing, logistics, inspections and fleet management solutions. The company also maintains a leadership position in the use of data and technology to deliver clear, actionable insights to customers on pricing, matching supply and demand and inventory optimization. In 2018, KAR generated approximately $2.4 billion of revenue. It is well-positioned with attractive opportunities for enhanced growth and margins around the globe.

IAA will operate the pre-separation salvage auction businesses of KAR, primarily comprised of Insurance Auto Auctions, Inc. in the United States, Impact Auto Auctions Ltd. in Canada and HBC Vehicle Services Limited in the United Kingdom. Through those businesses, IAA has been a leader in total loss claim solutions and damaged and salvage vehicle auctions in North America and the United Kingdom. In 2018, Insurance Auto Auctions Inc. generated approximately $1.3 billion of revenue.
Under the terms of the spin-off, KAR shareholders retained their KAR shares and received one IAA share for every KAR share held as of 5:00 p.m. EDT on June 18, 2019, the record date for the distribution. Beginning today, IAA will commence “regular way” trading on the NYSE.

Barclays Capital Inc. acted as financial advisor to KAR and IAA in connection with the separation. Skadden, Arps, Slate, Meagher & Flom LLP acted as counsel in connection with the transaction.

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KAR Contacts
 
Media Inquiries:
Analyst Inquiries:
Gene Rodriguez Miller
Mike Eliason
(317) 343-5243
(317) 249-4559
gene.rodriguez@karauctionservices.com
mike.eliason@karauctionservices.com

About KAR Auction Services
KAR Auction Services (NYSE: KAR) provides sellers and buyers across the global wholesale used vehicle industry with innovative, technology-driven remarketing solutions. KAR’s unique end-to-end platform supports whole car, salvage, financing, logistics and other ancillary and related services, including the sale of nearly 3.5 million units valued at approximately $30 billion through our auctions. Our integrated physical, online and mobile marketplaces reduce risk, improve transparency and streamline transactions for customers in more than 70 countries. Headquartered in Carmel, Ind., KAR has approximately 15,000 employees across the United States, Canada, Mexico and Europe. For more information go to www.karauctionservices.com . For the latest KAR news follow us on Twitter @KARspeaks .

Forward-Looking Statements
Certain statements contained in this release include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and which are subject to certain risks, trends and uncertainties. In particular, statements made that are not historical facts may be forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions identify forward-looking statements. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements. Such forward-looking statements include the statements regarding future financial and operating performance of each company, benefits and synergies of the separation, strategic and competitive advantages of each company, future opportunities for each company and any other statements regarding events or developments that KAR or IAA believes or anticipates will or may occur in the future. Factors that could cause or contribute to such differences include those matters disclosed in KAR’s Securities and Exchange Commission filings. KAR disclaims any obligation or undertaking to update any forward-looking statements.