Exhibit 10.16c

 

SECOND AMENDMENT
TO THE
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
KAR Holdings II, LLC

 

This Second Amendment to the Second Amended and Restated Limited Liability
Company Agreement of KAR Holdings II, LLC (this “Amendment”), effective as of
December 15, 2009, amends the Second Amended and Restated Limited Liability
Company Agreement of KAR Holdings II, LLC, dated April 20, 2007, as amended by
the First Amendment thereto, dated December 10, 2009 (as the same may be amended
from time to time, the “Agreement”).  Capitalized terms used but not otherwise
defined herein shall have the meanings given such terms in the Agreement.

 

WHEREAS, the undersigned, constituting all of the Investor Members of the
Company, desire to amend the Agreement to make certain modifications to the
treatment of the Class B Common Units.

 

NOW THEREFORE, in accordance with Section 14.10 of the Agreement and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the undersigned, constituting
all of the Investor Members, hereby agree as follows:

 

1.             Amendment.

 

(a)           Section 9.1(d) of the Agreement is hereby amended and restated to
read in its entirety as follows:

 

“(d)         Notwithstanding anything to the contrary contained in this
Agreement, if on any IAAI Dilution Calculation Date, there exists any IAAI
Rollover Dilution Amounts, then with respect to the cash distribution under
Section 9.1(b) that occurs on the date immediately following such IAAI Dilution
Calculation Date (x) the aggregate amount of cash distributions to holders of
Class A Common Units shall be deemed to be increased by the amount of the IAAI
Rollover Dilution Amount on such date and (y) the aggregate amount actually
distributed to Axle LLC in respect of its Class B Common Units will be reduced
(each reduction, an “IAAI Dilution Reduction”) by the IAAI Rollover Dilution
Amount on such date.  The IAAI Rollover Dilution Amount shall be reduced
dollar-for-dollar for any IAAI Dilution Reductions until the IAAI Rollover
Dilution Amount is reduced to zero; provided, however, in the event that, on any
IAAI Dilution Calculation Date, any Excess Tax Benefit exists, then no
adjustment to such distribution shall be made under clause (x) and (y) above and
the amount of the Excess Tax Benefit shall reduce, on a dollar-for-dollar basis,
the IAAI Rollover Dilution Amount calculated on the next IAAI Dilution
Calculation Date; it being understood that the amount of the Excess Tax Benefit
shall be reduced, on a dollar-for-dollar basis, as the IAAI Rollover Dilution

 

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Amount is reduced through the application of this sentence and no IAAI Rollover
Dilution Amount shall exist if and to the extent the amount of the Excess Tax
Benefit is greater than zero.  Exhibit B hereto contains illustrative examples,
with different assumptions as described therein, of the intended mechanics for
how the IAAI Dilution Reduction (and related definitions) are intended to occur
(the “IAAI Dilution Illustrative Example”).  Notwithstanding anything to the
contrary contained herein, the Members acknowledge and agree that any
inconsistencies between the provisions of this Agreement and the IAAI Dilution
Illustrative Example shall be resolved in favor of the IAAI Dilution
Illustrative Example.

 

(b)           Section 15.1 of the Agreement is hereby amended to include the
following defined terms, in the appropriate alphabetical order:

 

“Adjusted Fully Diluted KAR Shares” means, as of any IAAI Dilution Calculation
Date, a number of shares of Common Stock of KAR Auction Services equal to the
total number of shares of Common Stock of KAR Auction Services issued and
outstanding immediately prior to such IAAI Dilution Calculation Date plus the
number of shares of Common Stock of KAR Auction Services equal to the Assumed
IAAI Option Exercised Shares as of such IAAI Dilution Calculation Date.

 

“Applicable Per-Share Price” means, as of any IAAI Dilution Calculation Date,
either (i) if such IAAI Dilution Calculation Date occurs in connection with a
distribution of cash proceeds from the consummation of a Secondary Sale, then
such price shall be the Secondary Sale Share Price relating to the shares of
Common Stock of KAR Auction Services being sold on the Secondary Sale Date
relating to such IAAI Dilution Calculation Date, (ii) if such IAAI Dilution
Calculation Date occurs as a result of a distribution of cash resulting from a
cash dividend declared and paid by KAR Auction Services on its Common Stock,
then such price shall be the amount of such dividends paid per-share of KAR
Auction Services Common Stock, or (iii) if such IAAI Dilution Calculation Date
occurs as a result of any other cash distribution, then such price shall be the
price per-share of Common Stock of KAR Auction Services as determined in good
faith by the Board at such time.

 

“Assumed IAAI Option Exercised Shares” means, as of any IAAI Dilution
Calculation Date, (i) the number of shares of Common Stock of KAR Auction
Services issuable pursuant to the Assumed IAAI Vested Options as of such IAAI
Dilution Calculation Date (assuming that the exercise price per share of such
Assumed IAAI Vested Options was equal to the Applicable Per-Share Price), less
(ii) a number of shares of Common Stock of KAR Auction Services equal to (x) the
aggregate strike price of all such Assumed IAAI Vested Options divided by
(y) the Applicable Per Share Price.

 

“Assumed IAAI Vested Options” means, as of any IAAI Dilution Calculation Date,
the sum of the IAAI Dilutive Interests that (i) have not been exercised but are
fully vested, as of such date, in accordance with the terms and conditions of
the stock option plan and stock option agreement governing the

 

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terms of such IAAI Dilutive Interests, plus (ii) are unvested, as of such date,
but have a Price Hurdle applicable to the determination of when such IAAI
Dilutive Interests become vested in accordance with the terms and conditions of
the stock option plan and stock option agreement governing the terms of such
IAAI Dilutive Interests that is below the Applicable Per Share Price, plus
(iii) are unvested, as of such date, but have a Price Hurdle applicable to the
determination of when such IAAI Dilutive Interests become vested in accordance
with the terms and conditions of the stock option plan and stock option
agreement governing the terms of such IAAI Dilutive Interests at a price-per
share of Common Stock that is the Price Hurdle that is immediately above the
Applicable Per-Share Price as of such IAAI Dilution Calculation Date; it being
understood that no IAAI Dilutive Interest may be double counted in the foregoing
calculations.

 

“Cash Exercise” means, with respect to any option to acquire shares of Common
Stock of KAR Auction Services, the exercise of such option by the holder thereof
in a manner that involves a payment by such holder of the exercise price of such
option to KAR Auction Services (whether such payment is in the form of cash,
cash equivalents, securities or any other form); it being understood that a
exercise of such option through a brokers cashless exercise program that does
not involve a payment by such holder of the exercise price of such option to KAR
Auction Services shall not be a Cash Exercise.

 

“Cash Exercised IAAI Dilutive Adjusted Shares” means, with respect to any IAAI
Dilution Period, the product of (i) the aggregate number of shares of Common
Stock of KAR Auction Services issued to the IAAI Dilutive Holders during such
IAAI Dilution Period in respect of the exercise of IAAI Dilutive Interests held
by such IAAI Dilutive Holders but only to the extent such exercise constituted a
Cash Exercise multiplied by (ii) a fraction, the numerator of which is the
weighted average exercise price of the IAAI Dilutive Interests described in
clause (i) above and the denominator of which is weighted average stock price of
shares of Common Stock of KAR Auction Services on the closing of the business
day in which the IAAI Dilutive Interests described in clause (i) above are
exercised.

 

“Excess Tax Benefit” means, as of any IAAI Dilution Calculation Date, the
amount, if any, by which the amount of the KAR LLC Participation in IAAI
Dilutive Interests Tax Benefit as of such date exceeds the amount of the Initial
Aggregate Foregone Value as of such date.

 

“IAAI Dilution Calculation Date” shall be deemed to occur on the Business Day
immediately prior to the date pursuant to which the Company makes a cash
distribution under Section 9.1(b).

 

“IAAI Dilution Illustrative Example” has the meaning set forth in
Section 9.1(d).

 

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“IAAI Dilution Period” means, with respect to any IAAI Dilution Calculation
Date, a period of time commencing on the consummation of the Initial Public
Offering and ending on such IAAI Dilution Calculation Date.

 

“IAAI Dilution Reduction” has the meaning set forth in Section 9.1(d).

 

“IAAI Dilutive Holders” means, as of any date of determination, those
individuals set forth on Exhibit C hereto which represents the individuals that
hold IAAI Dilutive Interests, and any of their respective permitted transferees.

 

“IAAI Dilutive Interests” means, as of any date of determination, the KAR
Options held by the IAAI Dilutive Holders that are set forth on Exhibit C
hereto; it being understood, for the avoidance of doubt, that the IAAI Dilutive
Interests do not include any KAR Options granted at any time on or following
April 20, 2007.

 

“IAAI Dilutive Shares” means, with respect to any IAAI Dilution Period, the
aggregate number of shares of Common Stock of KAR Auction Services issued to the
IAAI Dilutive Holders during such IAAI Dilution Period in respect of the
exercise of IAAI Dilutive Interests held by such IAAI Dilutive Holders minus the
number (if any) of Cash Exercised IAAI Dilutive Adjusted Shares with respect to
such IAAI Dilution Period plus the number of shares of Common Stock of KAR
Auction Services equal to the Assumed IAAI Option Exercised Shares as calculated
on the IAAI Dilution Calculation Date that is the ending of such IAAI Dilution
Period.

 

“IAAI Rollover Dilution Amount” means, as of any IAAI Dilution Calculation Date,
the product of (x) the amount of the Initial Aggregate Foregone Value as of such
date minus the amount of the KAR LLC Participation in IAAI Dilutive Interests
Tax Benefit as of such date multiplied by (y) a fraction, the numerator of which
is the total number of Class A Common Units issued and outstanding as of such
date and the denominator of which is the total number of Class A Common Units
and Class B Common Units issued and outstanding as of such date.

 

“Implied IAAI Dilutive Interests Tax Benefit” means, as of any IAAI Dilution
Calculation Date, the product of (x) the aggregate compensation expense incurred
by KAR Auction Services for U.S. federal, state and local or foreign tax
purposes relating to the exercise of IAAI Dilutive Interests during the Interim
Tax Benefit Period ending on such IAAI Dilution Calculation Date multiplied by
the KAR Applicable Tax Rate for the four quarter period preceding the IAAI
Dilution Calculation Date.

 

“Implied Share Price” means, as of any IAAI Dilution Calculation Date, (x) the
Implied Value as of such date divided by (y) the Adjusted Fully Diluted

 

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KAR Shares as of such date minus the number of IAAI Dilutive Shares in the IAAI
Dilution Period ending on such IAAI Dilution Calculation Date.

 

“Implied Value” means, as of any IAAI Dilution Calculation Date, an amount equal
to the product of the number of Adjusted Fully Diluted KAR Shares as of such
date multiplied by the Applicable Per-Share Price.

 

“Initial Aggregate Foregone Value” means, as of any IAAI Dilution Calculation
Date, either (1) if such IAAI Dilution Calculation Date relates to a Secondary
Sale, then an amount equal to the product of (x) the Implied Share Price as of
such date minus the Applicable Per-Share Price as of such date multiplied by
(y) the number of shares of Common Stock of KAR Auction Services sold by the
Company in such Secondary Sale or (2) if such IAAI Dilution Calculation Date
relates to any distribution (other than in connection with a Secondary Sale),
then an amount equal to the product of (x) the Implied Share Price as of such
date minus the Applicable Per-Share Price as of such date multiplied by (y) the
number of shares of Common Stock of KAR Auction Services beneficially held by
the Company on such date.

 

“Interim Tax Benefit Period” means a period of time commencing on an IAAI
Dilution Calculation Date and ending on the next IAAI Dilution Calculation Date;
it being understood that the first Interim Tax Benefit Period will commence on
the consummation of the Initial Public Offering and end on the first IAAI
Dilution Calculation Date.

 

“KAR Applicable Tax Rate” means the effective tax rate of KAR Auction Services
(federal, state, local and foreign (as applicable), taking into account any
deductions of state or local taxes against federal tax liability and including
the impact of utilization of any existing net operating losses or other tax
attributes).

 

“KAR LLC Participation in IAAI Dilutive Interests Tax Benefit” means, as of any
IAAI Dilution Calculation Date, the product of (x) the Implied IAAI Dilutive
Interests Tax Benefit as of such date multiplied by (y) a fraction, the
numerator of which is the number of shares of Common Stock of KAR Auction
Services beneficially held by the Company on such date (and, for the avoidance
of doubt, prior to any Secondary Sale, if applicable, relating thereto) and the
denominator of which is the Adjusted Fully Diluted KAR Shares as of such date
minus the number of shares of Common Stock of KAR Auction Services equal to the
Assumed IAAI Option Exercised Shares as of such IAAI Dilution Calculation Date.

 

“KAR Options” means options to purchase shares of Common Stock of KAR Auction
Services granted under the KAR Auction Services, Inc. Stock Incentive Plan, the
KAR Auction Services, Inc. Conversion Option Plan and other

 

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stock option plans and agreements of KAR Auction Services that may be in place
from time to time.

 

“Price Hurdle” shall mean, each of the following stock prices of Common Stock of
KAR Auction Services: (i) $16.01, (ii) $19.21, (iii) $22.41 and (iv) $25.62.

 

“Secondary Sale” means any date following the Initial Public Offering on which
the Company sells shares of Common Stock of KAR Auction Services held by the
Company.

 

“Secondary Sale Date” means any date on which a Secondary Sale occurs.

 

“Secondary Sale Share Price” means, with respect to a Secondary Sale occurring
in connection with a distribution of cash proceeds, the price per share (taking
into account all underwriters’ discounts relating to such sale) at which the
Company sells shares of Common Stock of KAR Auction Services in such Secondary
Sale.

 

2.             Headings.  Headings in this Amendment are for convenience of
reference only, and shall neither limit nor amplify the provisions of this
Amendment.

 

3.             Continuation of Agreement.  Except as otherwise expressly
provided herein, all of the terms and provisions of the Agreement shall remain
in full force and effect and this Amendment shall not amend or modify any other
rights, powers, duties, or obligations of any party to the Agreement.

 

4.             Complete Agreement.  This Amendment contains the entire agreement
between the parties hereto with respect to the matters contained herein and
supersedes and replaces any prior agreement between the parties with respect to
the matters set forth in this Amendment.

 

5.             Counterparts.  This Amendment may be executed in any number of
counterparts and any such counterparts may be transmitted by facsimile
transmission, and each of such counterparts, whether an original or a facsimile
of an original, shall be deemed to be an original and all of such counterparts
together shall constitute a single agreement.

 

[Signatures appear on the following page.]

 

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IN WITNESS WHEREOF, the parties have hereunto executed this Amendment as of the
date first above written.

 

 

GS CAPITAL PARTNERS VI PARALLEL, L.P.

 

 

 

 

By:

GS ADVISORS VI, L.L.C., its General Partner

 

 

 

 

By:

/s/ Laurie E. Schmidt

 

 

Name: Laurie E. Schmidt

 

 

Title: Vice President

 

 

 

 

 

 

 

GS CAPITAL PARTNERS VI GMBH & CO. KG

 

 

 

 

By:

GS ADVISORS VI, L.L.C., its Managing Limited Partner

 

 

 

 

By:

/s/ Laurie E. Schmidt

 

 

Name: Laurie E. Schmidt

 

 

Title: Vice President

 

 

 

 

 

 

 

GS CAPITAL PARTNERS VI FUND, L.P.

 

 

 

 

By:

GSCP VI ADVISORS, L.L.C., its General Partner

 

 

 

 

By:

/s/ Laurie E. Schmidt

 

 

Name: Laurie E. Schmidt

 

 

Title: Vice President

 

 

 

 

 

 

 

GS CAPITAL PARTNERS VI OFFSHORE FUND, L.P.

 

 

 

 

By:

GSCP VI OFFSHORE ADVISORS, L.L.C.

 

 

its General Partner

 

 

 

 

By:

/s/ Laurie E. Schmidt

 

 

Name: Laurie E. Schmidt

 

 

Title: Vice President

 

 

Signature Page —Second Amendment to Second Amended and Restated Limited
Liability Company Operating Agreement

 

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KELSO INVESTMENT ASSOCIATES VII, L.P.

 

 

 

By:

Kelso GP VII, L.P., its General Partner

 

 

 

 

By:

Kelso GP VII, LLC, its General Partner

 

 

 

 

By:

/s/ James J. Connors, II

 

 

Name: James J. Connors, II

 

 

Title: Managing Member

 

 

 

 

 

 

 

KEP VI, LLC

 

 

 

 

By:

/s/ James J. Connors, II

 

 

Name:  James J. Connors, II

 

 

Title:  Managing Member

 

 

 

 

 

 

 

AXLE HOLDINGS II, LLC

 

 

 

By:

/s/ John W. Kett

 

 

Name:  John W. Kett

 

 

Title:  Sr. Vice-President & Chief Financial Officer

 

 

 

 

 

 

 

VALUEACT CAPITAL MASTER FUND, L.P.

 

 

 

 

By:

VA Partners I, LLC, its General Partner

 

 

 

 

By:

/s/ George F. Hamel, Jr.

 

 

Name: George F. Hamel, Jr.

 

 

Title: Chief Operating Officer

 

 

 

 

 

 

 

PCAP KAR LLC

 

 

 

By:

/s/ David Ament

 

 

Name: David Ament

 

 

Title: President

 

 

Signature Page —Second Amendment to Second Amended and Restated Limited
Liability Company Operating Agreement

 

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