Item 1.01 Entry Into a
Material Definitive Agreement.
Entry into
Fifth Amendment to Credit Agreement
On September 2,
2020, KAR Auction Services, Inc., a Delaware corporation (the “Company”), entered into a fifth amendment to
its existing credit agreement. The fifth amendment (1) eliminates the financial covenant “holiday” provided by the
fourth amendment agreement, dated as of May 29, 2020 (the “Fourth Amendment”), by and among the Company, JPMorgan
Chase Bank, N.A., as administrative agent, certain subsidiaries of the Company party thereto and the certain revolving lenders
party thereto; (2) removes the monthly minimum liquidity covenant provided by the Fourth Amendment; and (3) eliminates the limitations
imposed by the Fourth Amendment on the Company’s ability to make certain investments, junior debt repayments, acquisitions
and restricted payments and to incur additional secured indebtedness.
The foregoing
summary of the Fifth Amendment Agreement, dated September 2, 2020 (the “Fifth Amendment”), by and among the
Company, JPMorgan Chase Bank, N.A., as administrative agent, certain subsidiaries of the Company party thereto and the certain
revolving lenders party thereto is not complete and is qualified in its entirety by reference to the full and complete text of
the Fifth Amendment, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Entry into
Agreement and Plan of Merger
On September 4, 2020, ADESA, Inc. (“ADESA”),
a subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among
ADESA, Showroom Merger Sub, Inc., a subsidiary of ADESA (“Merger Sub”), the Company, BacklotCars, Inc. (“BacklotCars”),
and Shareholder Representative Services LLC, as the securityholders representative. Pursuant to the terms of the Merger Agreement,
Merger Sub will merge with and into BacklotCars, with BacklotCars continuing as the surviving corporation and as a wholly-owned
subsidiary of ADESA (the “Merger”). The Company is the guarantor of the obligations of ADESA and Merger Sub
under the Merger Agreement.
In the Merger, each outstanding share of
BacklotCars common stock and preferred stock (other than those shares of common stock or preferred stock held by BacklotCars) will
be converted into the right to receive an amount in cash as set forth in the Merger Agreement. The value of the consideration payable
by ADESA in connection with the Merger is $425 million in cash. The Merger and the Merger Agreement have been approved by the Board
of Directors of the Company, the Board of Directors of BacklotCars and the requisite stockholders of BacklotCars.
Consummation of the Merger is subject to
customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”). Under certain circumstances, upon the termination of the
Merger Agreement relating to the failure to obtain necessary clearances for the Merger under the HSR Act, ADESA would be required
to pay a termination fee of $42.5 million to BacklotCars on the terms and conditions further set forth in the Merger Agreement.
The Merger Agreement also contains customary
representations and warranties and covenants, including, among other things, with respect to the operation of the business of BacklotCars
and its subsidiaries between the signing of the Merger Agreement and the closing of the Merger. In connection with the entry into
of the Merger Agreement, ADESA has obtained a customary representations and warranties insurance policy as recourse for certain
losses arising out of breaches of the representations and warranties of BacklotCars in the Merger Agreement and for certain pre-closing
taxes of BacklotCars.
The foregoing description of the Merger
does not purport to be complete and is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy
of which is attached hereto as Exhibit 2.1 and incorporated herein by reference.