5. Acquisition

On October 2, 2012 (“Closing Date”), the Company completed its acquisition (the “Central Merger” or “Merger”) of 100% of the outstanding common shares of KCPC Holdings, Inc., which was the ultimate parent of Central Parking Corporation (“Central”) for 6,161,332 shares of Company common stock and the assumption of approximately $217,675 of Central’s debt net of cash acquired. Additionally, Central’s former stockholders will be entitled to receive cash consideration of $27,000 to be paid three years after closing, to the extent the $27,000 is not used to satisfy seller indemnity obligations pursuant to the Agreement and Plan of Merger dated February 12, 2012 (the “Merger Agreement). The Company financed the acquisition through additional borrowings under the Senior Credit Facility (defined in Note 9. Borrowing Arrangements).

Pursuant to the Merger Agreement, the Company is entitled to indemnification from Central’s former stockholders (i) if and to the extent Central’s combined net debt and the absolute value of Central’s working capital (as determined in accordance with the Merger Agreement) (the “Net Debt Working Capital”) exceeded $285,000 as of September 30, 2012 and (ii) for certain defined adverse consequences as set forth in the Merger Agreement. Pursuant to the Merger Agreement, Central’s former stockholders are required to satisfy certain indemnity obligations, which are capped at $27,000 cash consideration (the “Capped Items”) only through a reduction of the $27,000 cash consideration. For certain other indemnity obligations set forth in the Merger Agreement which are not capped at the $27,000 cash consideration (the “Uncapped Items”), including the Net Debt Working Capital indemnity obligations described above, Central’s former stockholders may satisfy their indemnity obligations as follows (provided the Company reserves the right to reject the cash and stock alternatives and choose to reduce the $27,000 cash consideration):

· Central’s former stockholders can elect to pay the applicable amount with cash;

· Central’s former stockholders can elect to pay the applicable amount with the Company’s common stock (valued at $23.64 per share); or

· Central’s former stockholders can elect to reduce the $27,000 cash consideration by the applicable amount, subject to the condition that the cash consideration remains at least $17,000 to cover Capped Items.

The Company has determined that the Net Debt Working Capital was $298,729 as of September 30, 2012 and that, accordingly, the Net Debt Working Capital exceeded the threshold by $13,729. In addition, the Company has determined that it currently has indemnity claims for certain defined adverse consequences, which would reduce the cash consideration payable in three years by $6,580. The Company has periodically given Central’s former stockholders notice regarding indemnification matters since the closing date of the Merger and has made adjustments for known matters, although Central’s former stockholders have not agreed to such adjustments nor made any elections with respect to the payment of any Uncapped Items. The Company expects that it will have additional indemnity claims against the former stockholders of Central.

The following table sets forth the adjustments to the cash consideration payable by the Company to the former stockholders of Central, based upon the foregoing determinations:

Central Net Debt Working Capital at September 30, 2012 as defined in the Merger Agreement	$	(298,729	)
Threshold	285,000

Excess over the threshold	(13,729		)
Indemnification of certain defined adverse consequences, net	(6,237		)
Cash consideration payable in three years	27,000

Settled cash consideration	$	7,034

Present value of cash consideration as of March 31, 2014	$	5,940
Present value of cash consideration at the acquisition date	$	8,943

Accordingly, the fair value of the final consideration transferred to acquire all of Central’s outstanding stock at the acquisition date is as follows:

Stock consideration	$	140,726
Present value of cash consideration to be issued as of March 31, 2014	5,940

Total consideration transferred	$	146,666

The acquisition has been accounted for using the acquisition method of accounting (in accordance with the provisions of Accounting Standards Codification (“ASC”) 805, Business Combinations) which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The purchase price has been allocated based on the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition. The Company finalized the purchase price allocation during the third quarter 2013, which resulted in revision to the previously reported preliminary amounts and were applied retrospectively back to the date of the acquisition.

The Company has incurred certain acquisition and integration costs associated with the transaction that have been expensed as incurred and reflected in the Consolidated Statements of Income. The Company recognized $1,505 and $4,213 of these costs in the Consolidated Statement of Income for the three months ended March 31, 2014 and 2013, respectively, in General and Administrative Expenses.