nathan deal media report: emails reveal controversial business deal influenced by governor’s staff

Emails reveal controversial business deal influenced

by governors staffE-mail records obtained by Better Georgia through an Oct. 8, 2013 open records request reveal Georgia Gov. Nathan Deals chief-of-staff and other high-level state employees in the governors office were actively involved with Coparts attorney and the governors key mergers and acquisitions attorney in advance of the sale of the governors private business.

This new information is contrary to prior representations by the governors personal attorney and statements from the governor and his staff.

Gov. Deals staff misled the public regarding the extent of their involvement in the sale of

Gainesville Salvage.After Nathan Deal became governor, he and his attorney, Randy Evans, assured the public that the governors private business, including Gainesville Salvage, would be handled though a blind trust.

On 1/6/2011, Gov. Deal attorney Randy Evans told the Associated Press:

Jimmy Allen, a Tifton-based accountant and Deal political supporter, will serve as trustee of the governors assets and act as his surrogate on business matters. Deal is transferring his share of Gainesville Salvage Disposal into the trust as well as his holding in several limited liability companies, Evans said.

See EXHIBIT 1

On 7/4/2013, Gov. Deal attorney Randy Evans told the Atlanta Journal-Constitution that the sale of Gainesville Salvage was managed outside the governors office by the blind trust:

Although the property was managed in a blind trust, Deal still signed off on the final sale, his attorney said.

There was no reason, if youre fully vested in being the governor, to have another business out there, Evans said. Once he was elected he recognized that was a full-time job and he didnt want any suggestion of a crossover between the two.

See EXHIBIT 2

On 7/18/2013, the AJC reported that Gov. Deal denied knowledge that Copart owed the state $74 million in back taxes because the property was run in a blind trust:

Deal said Tuesday he had no intention of getting involved in the ongoing legal battle between the company, Copart, and Department of Revenue officials who say the firm failed to pay sales tax on parts sales. He said he had no knowledge of Coparts tax woes because the property was run in a blind trust, which means the assets are controlled by a third party.They will get no preferential treatment. The Department of Revenue has jurisdiction over this and will deal with that case just like they do other cases, he said. The governors office has no involvement with this. None at all.

See EXHIBIT 3

Likewise, Deal attorney Randy Evans told the AJC on 7/18/2013 that the Governor wasnt involved in the transaction but approved the final agreement.

Deal attorney Randy Evans said the governor wasnt involved in the negotiations, but approved the final agreement. Evans said knowing about Coparts tax issues wouldnt have affected the final deal either way.

We walled off any issues relating the state and state business to avoid any suggestion that it had or would have any impact on the transaction, Evans told the AJC.

See EXHIBIT 3

Now, as a result of an open records request, we know that, contrary to what they claimed, the Governors office was deeply involved in the governors personal business affairs prior to the sale of Gainesville Salvage. Specifically, the governors top aides, including Chief of Staff Chris Riley worked in an effort to control the content of public information regarding the sale.

NOTE: Jimmy Allen, who was disclosed as the financial manager of Gainesville Salvage on behalf of Gov. Deal, was never mentioned anywhere in the email stream. He was never copied on the emails from the governors office but he did confirm the transaction to the media.

See EXHIBIT 4

Gov. Deal used government resources for personal gain.

Emails show that the Governors Chief of Staff and other high-level staff, on state time, using state resources, including computers and email, consulted on the distribution of public information for the sale of Gainesville Salvage, the governors personal business, to Copart, Inc., a publicly traded company involved in a $74 million tax dispute with the state.

The Governors lawyers at McKenna, Long and Aldridge, his Chief of Staff, Deputy Chief of Staff for Communications and Executive Counsel were all involved in editing a press release prepared by Copart, Inc. announcing the sale.

See EXHIBIT 4

On Friday, May 3, 2013, at 5:21 p.m., Greg DePasquale, attorney for Copart, Inc, sent an email to Kristen Beystehner, partner at McKenna, Long and Aldridge. He included a draft press release regarding the acquisition of Gainesville Salvage.

Hi, Kristen. Below is the draft release. Let me know if your client has any objections. Best, Greg

Ms. Beystehners client was Gov. Nathan Deal. She focuses her practice on general corporate counseling, with an emphasis on mergers and acquisitions.

See EXHIBIT 5

1/26/14, 9:45 AMKristen Beystehner: McKenna Long & Aldridge LLP

Page 1 of 2http://www.mckennalong.com/professionals-KristenBeystehner.html

Practices:

Corporate

Financing and Lending

Joint Ventures and StrategicAlliances

Mergers and Acquisitions

Private Equity, Hedge Fundsand Venture Capital

International

Canada-U.S. InternationalPractice

Civic Activities:

Pro Bono Partnership ofAtlanta, Board of Advisors

Everybody Wins! Power LunchProgram, Reading Mentor

Publications:

"Purchase Price Adjustments:Buyers (and Sellers) Beware,"Financier Worldwide,November 2012 (co-authored with Gregory Browand Ann-Marie McGaughey).

"See Ya Later, Gator:Assessing Whether PlacingPop-Up Advertisements onAnother Company's WebsiteViolates Trademark Law," 11J. Intell. Prop. L. 87, 2003.

Seminars and Presentations:

Kristen M. BeystehnerPartner - New [email protected] vCard

230 Park Avenue17th FloorNew York, NY 10169

TEL: 212.905.8324 FAX: 212.922.1819

Atlanta303 Peachtree Street, NESuite 5300Atlanta, GA 30308

ALT TEL: 404.527.8525 ALT FAX: 404.527.4198

ExperienceKristen M. Beystehner focuses her practice on general corporate counseling,with an emphasis on mergers and acquisitions. In addition to mergers andacquisitions, her experience includes working with clients to structure andimplement strategic alliance relationships; advising clients in domestic andinternational commercial contract negotiation; and assisting borrowers andlenders in financing transactions. Ms. Beystehner regularly counsels clientsregarding entity formation and organization, dissolutions and liquidations, andcorporate governance matters. Ms. Beystehner was recognized as a GeorgiaSuper Lawyers Rising Star in 2011 and 2012 and was selected by her peersas a member of Georgia Trends Legal Elite.

While in law school, Ms. Beystehner served as Editor-in-Chief of the Journal ofIntellectual Property Law. As an undergraduate, she was a four-time varsityletter winner on the Northwestern University womens golf team and a memberof the first team in the universitys history to compete in the NCAA Division IWomens Golf Championships.

Notable Engagements

Representation of Just Energy Group Inc. (TSX: JE) (NYSE: JE), which isone of North Americas leading independent natural gas and electricityretailers and providers of green energy, in connection with its acquisition of

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The Governors Office staff was interfacing with the McKenna acquisitions lawyer, Ms. Beystehner, who was handing the sale and acquisition of the governors private business.

Throughout the email stream, Jimmy Allen is never copied, nor mentioned.

On Friday, May 10, 2013, at 1:08 pm, Ms. Beystehner forwarded the May 3, 2013 email with the draft release from Coparts lawyer to Gov. Deals Deputy Chief of Staff for Communications, Brian Robinson.

On Friday, May 10, 2013 at 1:10 pm, Brian Robinson forwarded the email from Ms. Beystehner to Chris Riley and Ryan Teague, the governors inhouse executive counsel.

Chris Riley, Gov. Deals chief of staff, tried to hide details about the sale of the

governors private business.In advance of the sale, the Governors Chief of Staff, interacting with the Governors private attorneys and counsel for Copart, edited Coparts press release to remove Gainesville as much as possible and make it appear more metro Atlanta.

See EXHIBIT 4On Friday, May 10, 2013 at 1:13 p.m., Chris Riley sent an email to Ryan Teague and Randy Evans:

This doesnt incorporate the edits I made last Friday night.See EXHIBIT 4

Note: This makes clear that the Governors Chief of Staff had a copy of the draft release at least as of May 3, 2013, the day Coparts lawyer first emailed Ms. Beystehner. We were not provided with documentation of when Mr. Riley received the draft release, although it was part of our request.

On Friday, May 10, 2013 at 8:50 pm, Chris Riley sent an email to Ms. Beystehner and copied Randy Evans. This email reads as follows:

Kristen, Sorry I thought Ken had sent them to you. I am trying to remove Gainesville as much as possible and make it appear more metro Atlanta. That is all

See EXHIBIT 4

It appears that there is an email missing that Chris Riley is responding to in this email chain. It is not clear who Ken is, or why Chris Riley was trying to remove Gainesville as much as possible. Ken Cronan is Gov. Deals business partner with Gainesville Salvage, although it is unclear whether he is the Ken referenced here.

Gov. Deals office was successful in delaying press coverage regarding

Coparts acquisition of Gainesville Salvage.Alhough the email stream between the attorneys and the Governors office includes a draft press release, we can find no record that Copart released the statement announcing the acquisition.

Instead, on May 15, 2013, Copart, Inc. posted on Twitter:

The Tweet was cross-posted on Facebook on the same date:

See EXHIBIT 6

See EXHIBIT 7Social media posts never mention Copart acquired the new yard, only that the company opened one. Despite searches on PRNewswire, BusinessWire, NASDAQ and Coparts own public release website, we cannot find that the press release Chris Riley objected to ever surfaced.

The sale was not reported in Georgia press until July 3, 2013, when the information was released first to the Governors hometown paper, The Gainesville Times. Jimmy Allen confirmed the sale.

See EXHIBIT 8

Gov. Deals attorney obscured date of Gainesville Salvage transaction.

On 7/4/2013, Gov. Deal attorney Randy Evans told the AJC that the sale of Gainesville Salvage closed on June 26, 2013:

Evans said negotiations to sell the salvage business were in the works for months before it closed June 26. The agreement also gives Copart an option to buy the land from Deal and Cronan for $4.8 million at the end of the 10-year lease.

Copart is a publicly traded online car auction firm claiming an inventory of more than 50,000 vehicles. The company, which operates five facilities in Georgia and dozens more across the nation, is aggressively seeking an expansion. It signed a deal in May to purchase Salvage Parent, which has 39 locations in 14 states.

See EXHIBIT 2

However, Coparts official filings with the SEC, the statements of Coparts CEO during a May 31, 2013 investor call and the companys posts in social media support the conclusion that Copart acquired the assets of Gainesville Salvage on May 14, 2013.

On page 16 of the companys 4/30/2013 10-Q report filed on 6/5/2013 to the SEC, Copart, Inc. reported that they acquired the assets of Gainesville Salvage on May 14, 2013. This is the first mention of the sale in any official document from Copart:

On page 5 and page 31 of Coparts 10-K report to the SEC filed on 9/30/2013 for the fiscal year ending July 31, 2013, the company reported that it acquired the assets of Gainesville Salvage in May, 2013.

See EXHIBIT 10

On May 15, 2013, on their official Twitter feed, Copart, Inc. posted the following tweet stating, Copart has opened a new yard, Atlanta North, in Gainesville, Georgia. Check out the inventory. Note that the tweet makes no specific mention of the acquisition of Gainesville Salvage.

See EXHIBIT 5

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NOTE 14 - Subsequent Events

On May 14, 2013, the Company purchased the assets of Gainesville Salvage Disposal, a salvage vehicle auction company located in Gainesville,GA.

On May 30, 2013, the Company acquired Salvage Parent, Inc., which conducts business primarily as Quad City Salvage Auction, Crashed Toys, andDesert View Auto Auction. Combined, these businesses operate at thirty-nine locations in 14 states.

On May 31, 2013, the Company purchased the assets of Auto Salvage Auction, Inc., a salvage vehicle auction company with locations in Davisonand Ionia, MI.

The aggregate purchase price for these acquisitions, which closed subsequent to the quarter, was approximately $77.0 million.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, asamended, (the Exchange Act). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Insome cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "intend," "forecast," "anticipate,""believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. The forward-looking statementscontained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level ofactivity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed orimplied by these statements. These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities LitigationReform Act of 1995. These factors include those listed in Part I, Item 1A."Risk Factors" of this Form 10-Q and those discussed elsewhere in thisForm 10-Q. We encourage investors to review these factors carefully together with the other matters referred to herein, as well as in the other documentswe le with the Securities and Exchange Commission, or SEC. We may from time to time make additional written and oral forward-looking statements,including statements contained in our lings with the SEC. We do not undertake to update any forward-looking statement that may be made from time totime by us or on our behalf.

Although we believe that, based on information currently available to us and our management, the expectations reected in the forward-lookingstatements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance onthese forward-looking statements. In addition, historical information should not be considered an indicator of future performance.

Overview

We are a leading provider of online auctions and vehicle remarketing services in the United States (U.S.), Canada, the United Kingdom (U.K.), theUnited Arab Emirates (U.A.E.), Brazil and Germany.

We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the Internet through our Virtual Bidding SecondGeneration Internet auction-style sales technology, which we refer to as VB2. Vehicle sellers consist primarily of insurance companies, but also includebanks and nancial institutions, charities, car dealerships, eet operators and vehicle rental companies. We sell the vehicles principally to licensed vehicledismantlers, rebuilders, repair licensees, used vehicle dealers and exporters and, at certain locations, to the general public. The majority of the vehiclessold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or arerecovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. We offer vehicle sellers a full range ofservices that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price.

In the U.S. and Canada (North America), the U.A.E. and Brazil we sell vehicles primarily as an agent and derive revenue primarily from fees paid byvehicle sellers and vehicle buyers as well as related fees for services such as towing and storage. In the U.K., we operate both on a principal basis,purchasing the salvage vehicle outright from the insurance companies and reselling the vehicle for our own account, and as an agent. In Germany, wederive revenue from sales listing fees for listing vehicles on behalf of many German insurance companies.

Our revenues consist of sales transaction fees charged to vehicle sellers and vehicle buyers, transportation revenue, purchased vehicle revenues, andother remarketing services. Revenues from sellers are generally generated either on a xed fee contract basis where we collect a xed amount for sellingeach vehicle regardless of the selling price of the vehicle or, under our Percentage Incentive Program, or PIP, where our fees are generally based on apredetermined percentage of the vehicle sales price. Under the consignment, or xed fee program, we generally charge an additional fee for titleprocessing and special preparation. Although sometimes included in the consignment fee, we may also charge additional fees for the cost of transportingthe vehicle to our facility, storage of the vehicle, and other incidental costs. Under the consignment programs, only the fees associated with vehicleprocessing are recorded in revenue, not the actual sales price (gross proceeds). Sales transaction fees also include fees charged to vehicle buyers forpurchasing vehicles, storage, loading and annual registration. Transportation revenue includes charges to sellers for towing vehicles under certaincontracts and towing charges assessed to buyers for delivering vehicles. Purchased vehicle revenue includes the gross sales price of the vehicle which wehave purchased or are otherwise considered to own and is primarily generated in the U.K.

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See EXHIBIT 9

On a May 31, 2013 investor call, Copart CEO A. Jayson Adair said:

1/25/14, 5:33 PMCopart, Inc. (CPRT): Copart Management Discusses Q3 2013 Results - Earnings Call Transcript - Seeking Alpha

Page 3 of 10http://seekingalpha.com/article/1474011-copart-management-discusses-q3-2013-results-earnings-call-transcript?page=2

has been very successful in competing against ourselves and Insurance Auto Auctions. And so this acquisition brings thatwhole leadership team into the company.

John Lindell[ph] , who's the CEO of the company, said it best when we were talking to customers, that he had a choice ofmerging with one of the other large players or hooking up with another private equity company. And after he saw whatCopart's working on, what we're doing, he said there was no question in his mind, he wanted to hitch his horse to Copart.And that's really exciting for us. We're looking forward to all the things that they do and learning about that and integratingit into our company.

Some other points that I would just make about the company is that John will remain CEO of Quad Cities, and we're goingto be sitting down with all of our customers and finding out what they like best about Copart and what they like best aboutQuad Cities and raising the bar in terms of the level of service that we bring to all of our customers. So really it's a win-winacross the board on that.

We also announced or I should say we also acquired in the quarter -- or not in the quarter, but in the recent months,Gainesville Salvage in Georgia. And that gives us another location in the Georgia market. So I'm sure there's a ton ofquestions as I said Vinny Mitz, our President's here. And so he's going to step in, do some of the questions as well.

And at this time I'll turn it over to the operator for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go right to our first question from Bob Labick, CJS Securities.

Robert Labick - CJS Securities, Inc.

Just wondering if you could maybe give us a little more history of the acquisition, how long you were talking to them? Wasit a auction or a negotiated deal? Why did they sell now? You talked a little bit why to Copart but why now? And obviouslywe'd love to know any of the terms of the deal, or how big they are and then that kind of stuff if you would tell us that.

Vincent W. Mitz

Sure. This is Vinny. The deal came together very, very quickly. After some recent national RFPs, market share throughoutthe country had been settled and redistributed. And the owners of Quad Cities including John, were looking what was bestfor their strategic future and they were looking to team up to continue and accelerate their growth. And actually werelooking for a partner who would be able to help and assist in the growth of their company, separate from a normalacquisition integration. And that opportunity came together very quickly. Once we agreed philosophically how to handle thetransaction, it was just a matter of working out the financials. So it only took probably 3 to 4 months for the whole thing tocome together.

William E. Franklin

Bob, this is Will. Let me add just a little color to that, too. Quad Cities is a serious player in our space. We compete withthem all the time and we lose to them. The insurance companies use them because they like what they do. So we thinkthis is a win for us to be able to understand what they do well and incorporate that into our offerings as well.

Robert Labick - CJS Securities, Inc.

And could you -- I mean, maybe give some specifics on what they do well, better than Copart? And how you can bring thatto the rest of your yards?

A. Jayson Adair

Well, that's exactly what we're doing right now. We're in a period where we're going to be analyzing all their process andthen we're going to be looking at what we want to incorporate. So we don't plan on changing anything for the foreseeablefuture right now until we get all that figured out.

William E. Franklin

The May 14, 2013 acquisition was actually not in the quarter Mr. Adair was reporting on, which ended on April 30, 2013. The specific date of the acquisition of Gainesville Salvage, was, however, reported in the notes of that quarterly report, released on June 5, 2013 as a Subsequent Event.

This is the only place in any of Coparts filings where the specific date of the sale is reported.

See EXHIBIT 11

A Texas-based company that owes Georgia $74 million made Georgias bankrupt

governor a millionaire.On Wednesday, July 3, 3013, Randy Evans told the AJC that since 2011, Gov. Deal has tried to sell Gainesville Salvage.

Evans said the governor had tried to sell the business since he took office in 2011.See EXHIBIT 2

Gainesville Salvage was not a profitable company. In fact, the company was costing the governor money. He was going into debt to support its operation.

On 1/6/2011, Shannon McAffrey reported for the Associated Press that Gainesville Salvage and Disposal owed approximately $2 million.

In addition to the $1.35 million in Wilder debt, Deal and his wife listed two mortgages worth $810,000 on their financial disclosure. Additionally, Gainesville Salvage Disposal owes about $2 million.

See EXHIBIT 1

The AJC reported on July 17, 2013 that Copart agreed to pay Deal and his partner, Ken Cronan, $2 million each for the business, plus $20,000 per month for 10 years as a lease on the land, with an option to buy the land at the end of 10 years.

The sale of the cash-strapped auto salvage business was important to the governor. On July 3, 2013, Randy Evans told the AJC that the sale of Gainesville Salvage had improved the governors financial picture:

It has steadied because of this sale, Evans said of Deals financial situation. If you have an infusion of a few million dollars plus a monthly rental, you can only feel its a positive. I think his financial footing will be stronger than ever and hell have Gainesville Salvage in the history books.

See EXHIBIT 2

During the same period of time when the Governor was attempting to sell Gainesville Salvage, Copart, Inc. was fighting a $74 million proposed assessment from the Georgia Department of Revenue for nonpayment of sales and use tax on vehicles shipped overseas.

According to Coparts 10/31/2011 Form 10-Q filed on 12/12/2011, the Georgia Department of Revenue audited Copart for the period 1/1/2007-6/30/2011 and issued a proposed assessment of $73.8 million:

Copart still owes Georgia nearly $74 million dollars. As of the filing of its 10/31/2013 Form 10-Q filed on 12/10/2013, Copart, Inc. continues to show the $73.8 million dollar proposed assessment from the Georgia Department of Revenue:

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Goodwill represents the excess of cost over the fair market value of assets acquired in business combinations. In recent periods, the amount ofgoodwill on our balance sheet has increased substantially, principally as a result of a series of acquisitions we have made in the UK since 2007. As ofOctober 31, 2011, the amount of goodwill on our balance sheet subject to future impairment testing was $197.1 million.

Pursuant to FASB ASC 350, Intangibles-Goodwill and Other, we are required to annually test goodwill and intangible assets with indenite lives todetermine if impairment has occurred. Additionally, interim reviews must be performed whenever events or changes in circumstances indicate thatimpairment may have occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment chargefor the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assetsin the period the determination is made. The testing of goodwill and other intangible assets for impairment requires us to make signicant estimates aboutour future performance and cash ows, as well as other assumptions. These estimates can be affected by numerous factors, including changes in thedenition of a business segment in which we operate, changes in economic, industry or market conditions, changes in business operations, changes incompetition or potential changes in the share price of our common stock and market capitalization. Changes in these factors, or changes in actualperformance compared with estimates of our future performance, could affect the fair value of goodwill or other intangible assets, which may result in animpairment charge. For example, continued deterioration in worldwide economic conditions could affect these assumptions and lead us to determine thata goodwill impairment is required with respect to our acquisitions in the UK. We cannot accurately predict the amount or timing of any impairment ofassets. Should the value of our goodwill or other intangible assets become impaired, it could have a material adverse effect on our operating results andcould result in our incurring net losses in future periods.

An adverse outcome of a pending Georgia sales tax audit could have a material adverse effect on our results of operations and nancialcondition.

The Georgia Department of Revenue, or DOR, recently conducted a sales and use tax audit of our operations in Georgia for the period from January1, 2007 through June 30, 2011. As a result of the audit, the DOR issued a notice of proposed assessment for uncollected sales taxes in which it assertedthat we failed to remit sales taxes totaling $73.8 million, including penalties and interest. In issuing the notice of proposed assessment, the DOR stated itspolicy position that sales for resale to non-U.S. registered resellers are subject to Georgia sales and use tax.

We have engaged a Georgia law rm and outside tax advisors to review the conduct of our business operations in Georgia, the notice of assessment,and the DOR's policy position. In particular, our outside legal counsel has provided us with an opinion that our sales for resale to non-U.S. registeredresellers should not be subject to Georgia sales and use tax. In rendering its opinion, our counsel noted that non-U.S. registered resellers are unable tocomply strictly with technical requirements for a Georgia certicate of exemption but concluded that our sales for resale to non-U.S. registered resellersshould not be subject to Georgia sales and use tax notwithstanding this technical inability to comply.

Based on the opinion from our outside law rm and advice from outside tax advisors, we have not provided for the payment of this assessment in ourcondensed consolidated nancial statements. We believe we have strong defenses to the DOR's notice of proposed assessment and intend to defend thismatter. We have led a request for protest or administrative appeal with the State of Georgia. There can be no assurance, however, that this matter will beresolved in our favor or that we will not ultimately be required to make a substantial payment to the Georgia DOR. We understand that Georgia law andDOR regulations are ambiguous on many of the points at issue in the audit, and litigating and defending the matter in Georgia could be expensive andtime-consuming and result in substantial management distraction. If the matter were to be resolved in a manner adverse to Copart, it could have a materialadverse effect on our results of operations and condensed consolidated nancial statements.

New accounting pronouncements or new interpretations of existing standards could require us to make adjustments to accounting policies thatcould adversely affect the consolidated nancial statements.

The Financial Accounting Standards Board, the Public Company Accounting Oversight Board, and the SEC, from time to time issue newpronouncements or new interpretations of existing accounting standards that require changes to our accounting policies and procedures. To date, we donot believe any new pronouncements or interpretations have had a material adverse effect on our nancial condition or results of operations, but futurepronouncements or interpretations could require a change or changes in our policies or procedures.

Fluctuations in foreign currency exchange rates could result in declines in our reported revenues and earnings.

Our reported revenues and earnings are subject to uctuations in currency exchange rates. We do not engage in foreign currency hedgingarrangements and, consequently, foreign currency uctuations may adversely affect our revenues and earnings. Should we choose to engage in hedgingactivities in the future we cannot be assured our hedges will be effective or

32

See EXHIBIT 12

Had the company prevailed in their legal dispute with the GDOR, or had GDOR determined that the assessment was in error, the company would not continue to show this matter as pending in their financial statements.

Gov. Deal has pledged to do nothing to collect these back taxes, even as he pockets Coparts rent every month. From the AJC, 1/18/13:

See EXHIBIT 13

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Governmental Proceedings

The Georgia Department of Revenue, or DOR, conducted a sales and use tax audit of the Company's operations in Georgia for the period fromJanuary 1, 2007 through June 30, 2011. As a result of the audit, the DOR issued a notice of proposed assessment for uncollected sales taxes in which itasserted that the Company failed to remit sales taxes totaling $73.8 million, including penalties and interest. In issuing the notice of proposed assessment,the DOR stated its policy position that sales for resale to non-U.S. registered resellers are subject to Georgia sales and use tax.

The Company has engaged a Georgia law rm and outside tax advisors to review the conduct of its business operations in Georgia, the notice ofassessment, and the DOR's policy position. In particular, the Company's outside legal counsel has provided the Company an opinion that its sales forresale to non-U.S. registered resellers should not be subject to Georgia sales and use tax. In rendering its opinion, the Company's counsel noted that non-U.S. registered resellers are unable to comply strictly with technical requirements for a Georgia certicate of exemption but concluded that its sales forresale to non-U.S. registered resellers should not be subject to Georgia sales and use tax notwithstanding this technical inability to comply.

Based on the opinion from the Company's outside law rm and advice from outside tax advisors, the Company has adequately provided for thepayment of this assessment in its consolidated nancial statements. The Company believes it has strong defenses to the DOR's notice of proposedassessment and intends to defend this matter. The Company has led a request for protest or administrative appeal with the State of Georgia. There can beno assurance, however, that this matter will be resolved in the Company's favor or that the Company will not ultimately be required to make a substantialpayment to the Georgia DOR. The Company understands that Georgia law and DOR regulations are ambiguous on many of the points at issue in theaudit, and litigating and defending the matter in Georgia could be expensive and time-consuming and result in substantial management distraction. If thematter were to be resolved in a manner adverse to the Company, it could have a material adverse effect on the Company's consolidated results ofoperations, nancial position and cash ows.

NOTE 12 - Restructuring

The Company relocated its corporate headquarters to Dallas, Texas in 2012. The restructuring-related costs are as follows (in thousands):

Three Months Ended

October 31, 2013 2012 General and Administrative Severance $ 1,569 $ 286 Relocation 58 - Total general and administrative $ 1,627 $ 286 Yard Operations Severance $ - $ - Relocation 18 39 Total yard operations $ 18 $ 39

The movements in the severance accrual are as follows (in thousands):

Balance atJuly 31, 2013 Expense Payments

Balance atOctober 31, 2013

Severance $2,224 $1,569 $150 $3,643

The Company started transitioning its data center to a third party managed data center during the year ended July 31, 2013. The Company reviewedthe useful life of certain assets related to its data centers and determined they should be revised from an average of 60 months to an average of 45 monthsto reect the shorter useful lives of these assets. Additionally, facility depreciation related to the Company's IT operations, currently located in theCompany's ofces in Faireld, CA, was accelerated as the department is relocating to the Dallas, TX corporate headquarters. These changes in estimateare accounted for on a prospective basis, resulting in increased depreciation expense over the revised useful lives. These changes will result in $2.8million in accelerated depreciation expense to be recorded in scal 2014. These changes resulted in $1.7 million and $0.7 million in additionaldepreciation in the three months ended October 31, 2013 and 2012, respectively.

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The Atlanta JournalConstitution

July 18, 2013 Thursday Main Edition

NEW DETAILS TAX DISPUTE Salvage yard sale a headache for Deal

BYLINE: Greg Bluestein Staff

SECTION: NEWS Pg. 1A

LENGTH: 1002 words

HIGHLIGHT: Firm that bought out governor's business is battling over back taxes.

Gov. Nathan Deal was hoping to rid himself of a controversy that plagued his last campaign when he sold off alucrative salvage yard. Instead, the buyer's multimilliondollar tax woes have given fresh ammunition to critics.

The Texasbased car auction firm that agreed to pay $3.2 million each to Deal and his business partner Ken Cronanfor Gainesville Salvage & Disposal is battling the state over nearly $74 million in disputed back taxes, and thecompany has been ramping up its lobbying forces as it wages the legal fight.

Deal said Tuesday he had no intention of getting involved in the ongoing legal battle between the company, Copart,and Department of Revenue officials who say the firm failed to pay sales tax on parts sales. He said he had noknowledge of Copart's tax woes because the property was run in a blind trust, which means the assets are controlledby a third party.

"They will get no preferential treatment. The Department of Revenue has jurisdiction over this and will deal with thatcase just like they do other cases," he said. "The governor's office has no involvement with this. None at all."

But critics, noting that Deal appoints the tax department's chief, say it could prove hard for the governor to divorcehimself from the ongoing tax dispute.

"I knew the Copart deal was too good to be true. And it definitely is," said Melanie Sloan, the executive director ofCitizens for Responsibility and Ethics in Washington. "It was clear from the getgo that they wanted something, andthis may be it."

The transaction will net Deal and Cronan roughly $3.2 million each from the sale of the business and a 10year leaseon the land.

It is the company's fifth location in Georgia as it looks to expand its footprint in this market.

The salvage yard has long been the source of steady income and political controversy for Deal.

The partners once held a lucrative nobid agreement with the state to provide space for state employees to inspectrebuilt salvaged cars. The Atlanta JournalConstitution reported in 2009 that Deal, then a congressman, intervened

See EXHIBIT 3

Gov. Nathan Deal and his office staff are paid by the State of Georgia.

Taxpayers should not pay Gov. Deals top aides to manage the governors personal business especially when the business is supposedly

walled off and in a blind trust.

EXHIBIT 1


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TheAssociatedPressState&LocalWire

January6,2011Thursday10:05PMGMT

Dealsetsupblindtrust,restructuresdebt

BYLINE:BySHANNONMcCAFFREY,AssociatedPress

SECTION:STATEANDREGIONAL

LENGTH:728words

DATELINE:ATLANTA

Gov.electNathanDealhasnamedapoliticalsupportertooverseemanyofhisassetswhilehe'sinofficeandhasrestructuredmorethan$1millioninpersonaldebtremainingfromafailedfamilybusinessventure.

TheRepublican'slawyer,RandyEvans,saidDealhassetupablindtrustforhisholdings,followingthroughonacampaignpledge.Butheisn'tputtingeverythinginit.

DealwillmaintaincontroloverhisGainesvillehomeandHabershamCountylandthathousedhisdaughterandsoninlaw'ssportinggoodsstore.Bothpropertiesareupforsaletohelppayoffsome$1.35millionindebtheincurredfrombackingthefailedNorthGeorgiabusiness,WilderOutdoors.

DealwillbesworninMonday.Histroubledfinancesbecameaflashpointinlastyear'scampaignafterrevelationsthathewasdeeplyindebtandhadinitiallyfailedtodisclosemillionsofdollarsinbusinessloans.

JimmyAllen,aTiftonbasedaccountantandDealpoliticalsupporter,willserveastrusteeofthegovernor'sassetsandactashissurrogateonbusinessmatters.DealistransferringhisshareofGainesvilleSalvageDisposalintothetrustaswellashisholdinginseverallimitedliabilitycompanies,Evanssaid.

Allencontributed$5,600toDeal'sgubernatorialbidandhiswifegave$3,600.AllenalsovolunteeredasanaccountantforDeal'scampaign,helpingtheGOPnomineeamendhisflawedfinancialdisclosureform.

Onewatchdoggroupsaidthearrangementraisesconcerns.

"Itwouldhavebeenbettertofindsomeoneneutral,ratherthanasupportertoappearbeyondreproach,"WilliamPerry,thenewexecutivedirectorofCommonCauseGeorgia,said.

PerryalsosaidthatthelandsalescouldbeadistractionforDealasheleadsthestate.Andbykeepingthepropertiesoutofthetrust,heopenshimselfuptoallegationsofpoliticalfavoritismwhenthesalesgothrough.

ButWashingtonD.C.basedattorneyBrettKappel,whohashandledblindtrustsformembersofCongress,saidthearrangementsseemedfairlytypical.

"It'snotunusualtopicksomeoneyouknowasupporterasthetrustee,"Kappelsaid."Coulditraiseeyebrowswiththepublic?Sure.Butit'snotunusual."

EvanssaidDealwassettingahighethicalbar.

"Hewillhavenocontroloverwhatgoesinthere,"Evanssaid.

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AndEvanssaidplacingthelandDealhasonthemarketintoatrustwouldhavebeentoocomplicated.

"Itdidn'tmakesenseoftheyweregoingtobeimmediatelysoldtogothroughtheprocessoftransferringandsellingthem,"Evanssaid.

DealisalsokeepingaHabershamCountyhomeoutofthetrustthatheintendstousehisprimaryresidenceapartfromthegovernor'smansion.

TheWilderpropertyhasbeenundercontractsinceatleastOctober,butthesalehasnotgonethrough.TheGainesvillehomehasalsobeenonthemarketforsometimeforjustunder$1million.

DealhadbeenfacingaFeb.1deadlinetorepaytheroughly$2.2millionleftontheWilderOutdoorsloan,whichheandhiswifeSandrainheritedafterhisdaughterandsoninlawdeclaredbankruptcy.Whenthedebtwasrevealedduringthegeneralelectioncampaign,Dealvowedtomakegoodonthemoneyheowed.

TheDealshavesofarpaidoffabout$850,000,mainlythroughliquidatingalltheirretirementaccounts,Allensaid.

SouthCarolinaBankandTrustrestructuredtheremaining$1.35millionontheloan,pushingbackthematuritydateforaboutthreeyears,Allensaid.TheDealswillmakeanannualpaymentbutAllencouldnotsaywhatthatwas.Hecouldalsonotprovidetheinterestrate.

Inadditiontothe$1.35millioninWilderdebt,Dealandhiswifelistedtwomortgagesworth$810,000ontheirfinancialdisclosure.Additionally,GainesvilleSalvageDisposalowesabout$2million.

Asgovernor,hewilldrawasalaryofabout$140,000.He'ssettoearnfederalpensionofabout$52,000fromhis18yearsinCongress.TheDealsalsoreceiveabout$48,000ayearinSocialSecurity,recordsshow.

Dealhadpledgedduringhiscampaignforgovernortoplacehisassetsinablindtrust.Themanhe'sreplacingGov.SonnyPerduerefusedtodosoandhasfacedcriticismforconductinghisbusinessandmakinglandtransactionswhileinoffice.ButpreviousgovernorsinGeorgialikeZellMillerandRoyBarnescreatedblindtruststoavoidconflictswhileinoffice.

Online:

TransitionTeamofGov.electNathanDeal:

LOADDATE:January7,2011

LANGUAGE:ENGLISH

PUBLICATIONTYPE:Newswire

Copyright2011AssociatedPressAllRightsReserved

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TheAtlantaJournalConstitution

July4,2013ThursdayMainEdition

ETHICSDealsellssalvageyard

BYLINE:GregBluesteinStaff

SECTION:METRONEWSPg.1B

LENGTH:713words

HIGHLIGHT:Gainesvillebusinesscastanethicalcloudover2010campaign.

Gov.NathanDealhascuttieswithabusinessattheheartofanethicalcloudthatshroudedhislastcampaignashepreparestoaskvotersforasecondterminoffice.

Deal'sattorney,RandyEvans,saidWednesdaythatthegovernorandbusinesspartnerKenCronansoldGainesvilleSalvage&DisposaltoaTexasbasedauctionfirmforroughly$2millionapiece.Thecontractalsorequiresthefirm,Copart,topayDealandCronan$120,000eachannuallyover10yearstoleasetheland,whichthetwomenstillown.

Withthesale,Dealisseekingtoclosethechapterononeofhis2010campaign'sbiggestcontroversiesashemountsareelectionbidthatsofarfeaturesnoopponents.Italsoinjectsfreshcapitalintohisbankaccount,itselfafocusduringthecampaignasDealtriedtorepaybusinessloansforhisdaughter'sfailedsportinggoodsventure.

Thesalvagefirmonceheldalucrativenobidagreementwiththestatetoprovidespaceforstateemployeestoinspectrebuiltsalvagedcars.TheAtlantaJournalConstitutionreportedduringthelastgubernatorialcampaignthatDeal,thenacongressman,personallyintervenedwithstateofficialswhowantedtoopentheprogramtomorelocations.Thestoryledtoanethicscomplaintandacongressionalinvestigation.

Evanssaidthegovernorhadtriedtosellthebusinesssincehetookofficein2011.Althoughthepropertywasmanagedinablindtrust,Dealstillsignedoffonthefinalsale,hisattorneysaid.

"Therewasnoreason,ifyou'refullyvestedinbeingthegovernor,tohaveanotherbusinessoutthere,"Evanssaid."Oncehewaselectedherecognizedthatwasafulltimejobandhedidn'twantanysuggestionofacrossoverbetweenthetwo."

Thetiming,however,wasboundtoraisequestions.MelanieSloan,theexecutivedirectorofCitizensforResponsibilityandEthicsinWashington,alsoquestionedwhetheritwasafairdeal.

"It'sagoodthingifit'sinfactanarm'slengthtransaction,butIamskepticalthatthat'sthecase,"saidSloan,whoseorganizationfiledacomplaintclaimingDealviolatedcongressionalethicsrules.

EthicalquestionssurroundingthesalvageyardbecameacriticalissueduringDeal'srunforgovernor.



TheAJCreportedin2009thatDealforyearshadanobidagreementwiththestatethatpaidthepartnersnearly$300,000ayearovera20yearagreement.TheAJCfoundthatDealandhisstafffoughttopreservethearrangement,tellingstateofficialsthatithelpedkeepunsafevehiclesoffGeorgia'sstreets.

ThestorypromptedaninvestigationbytheOfficeofCongressionalEthics,whichfoundthatDeal,whowasthenamemberoftheU.S.House,mighthaveviolatedfederalethicsrules.DealresignedfromCongressinMarch2010beforetheorganizationcouldmoveforward.Atthetime,Dealsaidhewantedtodevotehimselffulltimetothegovernor'srace.

EvanssaidnegotiationstosellthesalvagebusinesswereintheworksformonthsbeforethedealwasfinalizedonJune26.TheagreementalsogivesCopartanoptiontobuythelandfromDealandCronanfor$4.8millionattheendofthe10yearlease.

Copartisapubliclytradedonlinecarauctionfirmclaiminganinventoryofmorethan50,000vehicles.Thecompany,whichoperatesfivefacilitiesinGeorgiaanddozensmoreacrossthenation,isaggressivelyseekinganexpansion.ItsignedadealinMaytopurchaseSalvageParent,whichhas39locationsin14states.

TheagreementwithCopartgivesDealaninfusionofcashtodealwithhisfamilyfinances.Recordsshowthatthegovernorandhiswife,Sandra,owned90percentofafailedsportinggoodsstoreopenedbyhisdaughterandsoninlawbythetimeitclosed.Thefinancialwoesofthebusiness,whichforcedClintWilderandCarrieDealWildertofileforbankruptcy,becameanissueduringthe2010governor'srace.

Evanssaidthemoneywilllikelybeusedtorestructurethegovernor'sdebt,thoughhewouldnotsayhowmuchDealowes.

"Ithassteadiedbecauseofthissale,"EvanssaidofDeal'sfinancialsituation."Ifyouhaveaninfusionofafewmilliondollarsplusamonthlyrental,youcanonlyfeelit'sapositive.Ithinkhisfinancialfootingwillbestrongerthaneverandhe'llhaveGainesvilleSalvageinthehistorybooks."

LOADDATE:July4,2013

LANGUAGE:ENGLISH

PUBLICATIONTYPE:Newspapers

Copyright2013TheAtlantaJournalConstitution

EXHIBIT 3



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TheAtlantaJournalConstitution

July18,2013ThursdayMainEdition

NEWDETAILSTAXDISPUTESalvageyardsaleaheadacheforDeal

BYLINE:GregBluesteinStaff

SECTION:NEWSPg.1A

LENGTH:1002words

HIGHLIGHT:Firmthatboughtoutgovernor'sbusinessisbattlingoverbacktaxes.

Gov.NathanDealwashopingtoridhimselfofacontroversythatplaguedhislastcampaignwhenhesoldoffalucrativesalvageyard.Instead,thebuyer'smultimilliondollartaxwoeshavegivenfreshammunitiontocritics.

TheTexasbasedcarauctionfirmthatagreedtopay$3.2millioneachtoDealandhisbusinesspartnerKenCronanforGainesvilleSalvage&Disposalisbattlingthestateovernearly$74millionindisputedbacktaxes,andthecompanyhasbeenrampingupitslobbyingforcesasitwagesthelegalfight.

DealsaidTuesdayhehadnointentionofgettinginvolvedintheongoinglegalbattlebetweenthecompany,Copart,andDepartmentofRevenueofficialswhosaythefirmfailedtopaysalestaxonpartssales.HesaidhehadnoknowledgeofCopart'staxwoesbecausethepropertywasruninablindtrust,whichmeanstheassetsarecontrolledbyathirdparty.

"Theywillgetnopreferentialtreatment.TheDepartmentofRevenuehasjurisdictionoverthisandwilldealwiththatcasejustliketheydoothercases,"hesaid."Thegovernor'sofficehasnoinvolvementwiththis.Noneatall."

Butcritics,notingthatDealappointsthetaxdepartment'schief,sayitcouldprovehardforthegovernortodivorcehimselffromtheongoingtaxdispute.

"IknewtheCopartdealwastoogoodtobetrue.Anditdefinitelyis,"saidMelanieSloan,theexecutivedirectorofCitizensforResponsibilityandEthicsinWashington."Itwasclearfromthegetgothattheywantedsomething,andthismaybeit."

ThetransactionwillnetDealandCronanroughly$3.2millioneachfromthesaleofthebusinessanda10yearleaseontheland.

Itisthecompany'sfifthlocationinGeorgiaasitlookstoexpanditsfootprintinthismarket.

ThesalvageyardhaslongbeenthesourceofsteadyincomeandpoliticalcontroversyforDeal.

Thepartnersonceheldalucrativenobidagreementwiththestatetoprovidespaceforstateemployeestoinspectrebuiltsalvagedcars.TheAtlantaJournalConstitutionreportedin2009thatDeal,thenacongressman,intervened



withstateofficialswhowantedtoopentheprogramtomorelocations.

Thestoryledtoanethicscomplaintandacongressionalinvestigation.

DealresignedfromCongressinMarch2010beforeanethicsorganizationcouldmoveforward,sayinghewantedtodevotehimselffulltimetothegovernor'srace.Afterhewaselected,heputthebusinessintheblindtrust.

Copart'sdisputeisoverwhetherpartssalestointernationalresellersaresubjecttoGeorgiasalestax.Astateauditfoundthecompanyowes$73.8millionintaxes,penaltiesandfeesaccumulatedbetween2007and2011.

ThecompanyisappealingbutsaidinaSecuritiesExchangeCommissionfilingthat"ambiguous"staterulesmeantheoutcomecouldgoeitherway.

Itwarnedinvestorsthat"litigatinganddefendingthematterinGeorgiacouldbeexpensiveandtimeconsumingandresultinsubstantialmanagementdistraction."Alosscouldhavea"materialadverseeffect"onthecompany'sbottomline,thefirmsaid.

Copart,whichdeclinedrepeatedrequestsforcomment,hassteppedupitsinterestinGeorgiapoliticsinthewakeofthetaxfight.

ThecompanyhadnolobbyistsonitspayrollherewhenitfirstdisclosedthedisputeinDecember2011.

Withinmonths,though,Coparthiredfourlobbyists,includinginfluentialveteransArthur"Skin"EdgeandTripMartin.Deal,forhispart,saidheisn'tawareofanylobbyingonCopart'sbehalf.

UnderthetermsofCopart'spurchaseagreement,DealandCronanwillgetroughly$2millionapieceforthesalvagebusinessandvehicles.ThecontractalsorequiresthefirmtopayDealandCronan$120,000eachannuallyover10yearstoleasetheland,andgivesCopartanoptiontobuythelandfor$4.8millionwhentheleaseagreementends.

DealattorneyRandyEvanssaidthegovernorwasn'tinvolvedinthenegotiationsbutapprovedthefinalagreement.EvanssaidknowingaboutCopart'staxissueswouldn'thaveaffectedthefinaldealeitherway.

"Wewalledoffanyissuesrelatingthestateandstatebusinesstoavoidanysuggestionthatithadorwouldhaveanyimpactonthetransaction,"EvanstoldtheAJC.

RecordsshowthatCronan,whodidn'treturncallsseekingcomment,hadprevioustiestoCopart.HewasamemberoftheusedpartsdivisionofthestateBoardofRegistrationofUsedMotorVehiclesinAugust2005whenitapprovedlicensesforthecompanytooperateinGeorgia.

Thegovernor'sofficewasparticularlysensitiveaboutthetimingofthesale,whichcomesashepreparestoaskvotersforasecondterm.

HefacesalikelyDemocraticopponentinNovemberandaGOPprimarychallengefromDaltonMayorDavidPennington,whosaidthelatest"ethicalcloud"distractsfocusfromGeorgia'seconomy.

Statetaxofficialsdeclinedrepeatedrequestsforcommentonthecase,butDeal'sofficesaiditwill"vigorouslypursuewhateverisowedthestate."

Somevotersstillhaveconcerns."I'mworriedCopartwillgetoffeasy,"saidJanetHudson,a69yearoldretiredsoftwareanalystfromHollySprings."Justthinkabouthowmanyteachersalariesthatmoneywouldpayfor."

BryanLong,directoroftheprogressivegroupBetterGeorgia,hintedatthechallengesaheadwhenhecalledforDealtorefuserentfromthecompanyuntilitpaysitsdebttothestate.

"CopartsolvedapoliticalandfinancialproblemforGov.Deal,whilethecompanyhasa$74millionproblemofitsownbeingdecidedbythestate,"saidLong,whosegroupoftenneedlesGOPleaders."IfGov.Dealweren'tinvolvedinthisbusinessdeal,evenhewouldbeoutraged."

Thegovernor,forhispart,seemedrelievedtoridhimselfofthebusinessasheratcheteduphisnextcampaign.Hesaidinanearlierinterviewthedecisiontosellthepropertywassimple.



"Anytimeyouhaveagoodoffertosellyourbusiness,"hesaid,"that'sagoodbusinessdecision."

LearnmoreontheHallCountysalvageyardanditspoliticaleffectonGov.NathanDeal.

LOADDATE:July18,2013

LANGUAGE:ENGLISH

PUBLICATIONTYPE:Newspapers

Copyright2013TheAtlantaJournalConstitution

EXHIBIT 4

Brumlow, Brandi

From: Sent: To: Cc: Subject:

Kristen,

Riley, Chris Friday, May 10, 2013 8:50PM Beystehner, Kristen Randy Evans Re: Copart/Recovery Services- Press Release I DRAFT

Sorry I thonght Ken had sent them to yon. I am trying to remove Gainesville as much as possible and make it appear to be more metro Atlanta. That is all.

For Immediate Release

Copart Acquires Salvage Auto Facility near Atlanta, Georgia

Dallas, TX..,. Co part, Inc. (NASDAQ: CPRT) today announced that it has acquired Gainesville Salvage Disposal, a 30-acre salvage vehicle site north of Atlanta. '

The addition of this facility will complement Copart's existing presence in Georgia. With locations in Savannah, Tifton and now with its fourth facility in the Atlanta area, Copart continues to expand its reach throughout the state.

'This additional facility in Georgia will further broaden our network allowing us to better serve our customers". said Copart's Chief Executive Officer Jay Adair. "The ability to have 4 locations in the metro Atlanta area will help us to reduce towing cost and cycle times for all our customers in the Atlanta metropolitan area. 11

1

"Brun,low, Brandi

From: Riley, Chris Sent: Friday, May 10, 2013 1:13 PM To: Subject:

Robinson, Brian; Teague, Ryan; '[email protected]' Re: Copart!Recovery Services - Press Release I DRAFT

This does not incorporate the edits I made last Friday night. Chris Riley

From: Robinson, Brian Sent: Friday, May 10, 2013 01:10PM Eastern Standard Time To: Teague; Ryan; Riley, Chris Subject: FW: CopartiRecovery Services - Press Release I DRAFT

From: Beystehner, Kristen [mailto:[email protected]] Sent: Friday, May 10, 2013 1:08 PM To: Robinson, Brian Cc: Evans, Randy Subject: FW: CopartiRecovery Services - Press Release I DRAFT Brian- the draft press release is in the body of the email below.

Kristen

Kristen M. Beystehner I Partner McKenna Long & Aldridge LLP 303 Peachtree Street I Suite 5300 ! Atlanta, GA 30308 Tel: 404.527.8525 J Fax: 404.527.8925 1 [email protected]

From: Greg DePasquale [mailto:[email protected]] Sent: Friday, May 03, 2013 5:21 PM To: Beystehner, Kristen Cc: susan Hogan Subject: draft press release

Hi Kristin,

Below is the draft release. Please let me know if your client has any objections.

Best, Greg

For Immediate Release

Copart Acquires Salvage Auto Facility near Atlanta, Georgia

Dallas, TX- Co part, Inc. (NASDAQ: CPRT) today announced that it has acquired Gainesville Salvage Disposal, a 30-acre salvage vehicle site north of Atlanta in Gainesville, Georgia.

1

The addition of this facility will complement Co part's existing presence in Georgia. With locations in Savannah, Tifton and now with its fourth facility in the Atlanta area, Copart continues to expand its reach throughout the state.

"This additional facility in Georgia will further broaden our network allowing us to better serve our customers". said Co part's Chief Executive Officer Jay Adair. "The ability to have a presence in Gainesville, Georgia will help us to reduce towing cost and cycle times for all our customers in Northeast Georgia.

Beginning May 22, 2013, Co part's new Atlanta North facility will auction inventory every Wednesday at 10 a.m. EDT. All Copart auctions are held online at Copart.com through the company's patented VB2 auction technology.

About Co part: Copart, founded in 1982, provides vehicle sellers with a full range of remarketing services to process and sell salvage and clean title vehicles to dealers, dismantlers, rebuilders, exporters and, in some states, to end users. Copart remarkets the vehicles through Internet sales utilizing its patented VB2 technology. Copart sells vehicles on behalf of insurance companies, banks, finance companies, fleet operators, dealers, car dealerships and others as well as cars sourced from the general public. The company currently operates 164 facilities in the United States, Canada, the United Kingdom, Brazil, Germany and the United Arab Emirates. Salvage vehicles are either damaged vehicles deemed a total loss for insurance or business purposes or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. For more information, or to become a member, visit Copart.com.

Contact: Deana Lot!, Assistant to the Chief Financial Officer (972) 391-5094 [email protected]

Greg DePasquale VP Legal I Asst. General Counsel Cop ali 14185 Dallas Parkway, Suite 300 Dallas, TX 75254 (972) 391-5033 Office (916) 715-0479 Mobile (972) 386-6736 Fax

CONFIDENTIALITY NOTICE: This e-mail and any attachments contain information from the law firm of McKenna Long & Aldridge LLP, alld are intended solely for the use of the named recipient or recipients. This e-mail may contain privileged attorney/client communications or work product. A11y dissemination of this e-mail by allyone other than an intended recipient is strictly prohibited. If you ale not a named recipient, you are prohibited from allY fmiher viewing of the e-mail or allY attachments or from making allY use of the e-mail or attachments. If you believe you have received this e-mail in error, notify the sender immediately and pennanently delete the e-mail, allY attachments, alld all copies thereof from any drives or storage media and destroy allY printouts of the e-mail or attachments.

IRS Circular 230 Disclosure: To comply with certain U.S. Treasury regulations, we inform you that, unless expressly stated otherwise/ any U.S. federal tax advice contained in this communication, including attachme~ts, was not intended or written to be used, C!-Dd cannot be used, by any taxpayer for the purpose of avoiding any penalties that may be imposed on such taxpayer by the Internal Revenue Service.

2

Brumlow, Brandi

From: Sent: To: Subject:

Daily News Clips Gov. Nathan Deal Monday, July 8, 2013

Good Morning!

ND

Gov. Deal's Communications Office Monday, July 08, 2013 8:55AM Gov. Deal's Communications Office News Clips 7/8

1. CLATL: First Slice 7/7/13: Deal gets out of the auto salvage business 2. WSB Radio: Interim report shows some improvement in DeKalb 3. Rome News-Tribune: Analysis: New education lobby aims to change political dynamic in Ga. 4. Crowd Sourcing: Georgia gets part of the bigger innovation economic picture right 5. AJC: Deal: State GOP can prove its message matters to minorities 6. AJC: Panel to review Ellis case can expect a fight 7. AJC: Commonsense Common Core's political risk 8. AJC: Businesses hail delay in health law mandate 9. AJC: Del

EXHIBIT 5



Practices:

Corporate

Financing and Lending

Joint Ventures and StrategicAlliances

Mergers and Acquisitions

Private Equity, Hedge Fundsand Venture Capital

International

Canada-U.S. InternationalPractice

Civic Activities:

Pro Bono Partnership ofAtlanta, Board of Advisors

Everybody Wins! Power LunchProgram, Reading Mentor

Publications:

"Purchase Price Adjustments:Buyers (and Sellers) Beware,"Financier Worldwide,November 2012 (co-authored with Gregory Browand Ann-Marie McGaughey).

"See Ya Later, Gator:Assessing Whether PlacingPop-Up Advertisements onAnother Company's WebsiteViolates Trademark Law," 11J. Intell. Prop. L. 87, 2003.

Seminars and Presentations:

Kristen M. BeystehnerPartner - New [email protected] vCard

230 Park Avenue17th FloorNew York, NY 10169

TEL: 212.905.8324 FAX: 212.922.1819

Atlanta303 Peachtree Street, NESuite 5300Atlanta, GA 30308

ALT TEL: 404.527.8525 ALT FAX: 404.527.4198

ExperienceKristen M. Beystehner focuses her practice on general corporate counseling,with an emphasis on mergers and acquisitions. In addition to mergers andacquisitions, her experience includes working with clients to structure andimplement strategic alliance relationships; advising clients in domestic andinternational commercial contract negotiation; and assisting borrowers andlenders in financing transactions. Ms. Beystehner regularly counsels clientsregarding entity formation and organization, dissolutions and liquidations, andcorporate governance matters. Ms. Beystehner was recognized as a GeorgiaSuper Lawyers Rising Star in 2011 and 2012 and was selected by her peersas a member of Georgia Trends Legal Elite.

While in law school, Ms. Beystehner served as Editor-in-Chief of the Journal ofIntellectual Property Law. As an undergraduate, she was a four-time varsityletter winner on the Northwestern University womens golf team and a memberof the first team in the universitys history to compete in the NCAA Division IWomens Golf Championships.

Notable Engagements

Representation of Just Energy Group Inc. (TSX: JE) (NYSE: JE), which isone of North Americas leading independent natural gas and electricityretailers and providers of green energy, in connection with its acquisition of

Menu



"Preparing for a Sale of theBusiness," ICLE Presentation,November 2012.

Hudson Energy Services, a New Jersey-based and privately-held electricand natural gas provider, and Fulcrum Retail Holdings, a Texas-based andprivately-held retail electricity provider.

Representation of The Home Depot (NYSE: HD) in connection with itsacquisition of MeasureComp, L.L.C. and CompuMeasure LLC, whichprovide measurement and quote-building services.

Representation of Aarons, Inc. (NYSE: AAN), a leader in U.S. sales andlease ownership and specialty retailer, in its purchase of an 11.5%economic interest in Perfect Home Holdings Limited, a privately-held UKrent-to-own company.

Representation of Toronto-based Herbal Magic Inc., which operates over300 weight loss and nutrition centers throughout Canada, in connectionwith its acquisition of LA Weight Loss, a Pennsylvania-based weight lossand nutrition business with centers located throughout the U.S.

Representation of UK and Netherlands-based Reed Elsevier (NYSE: RUK)and its subsidiaries in a variety of transactions across North America,including Canada and Mexico.

Representation of BCD Travel B.V., a privately owned Dutch companyproviding global corporate travel management services with operations in90 countries and over $12 billion in sales, in connection with its $475 millionsyndicated credit facility with ING Bank N.V., acting as Agent, and INGBank and Bank of America, acting as Issuing Banks. The senior creditfacility involved the pledge of security located in the U.S., the UK, Canada,Belgium, the Netherlands and Germany.

Representation of Valor Equity Partners, a Chicago-based private equityfirm, in several portfolio company acquisitions, financings and joint venturetransactions, with continued work post-closing, including follow-onacquisitions, implementation of management equity plans and other on-going operational matters.

Education

J.D., University of Georgia School of Law, cum laude, 2004

B.A., Northwestern University, with honors, 2001

Bar Admissions

Georgia

New York

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EXHIBIT 7

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GaPundit

July4,2013Thursday6:33PMEST

Gov.DealsellsGainesvilleautosalvagebusiness

LENGTH:235words

Jul04,2013(GaPundit:http://www.gapundit.comDeliveredbyNewstex)GaPundit:Gov.NathanDealandbusinesspartnerKenCronanhavesoldtheirGainesvilleSalvageandDisposalbusinessinHallCounty.

JimmyAllen,trusteeforDeal'sblindtrust,whichincludesallhisassetsanddebts,confirmedthesaleWednesdayevening.Dealfacesreelectionnextyear.Inhisfirstrunforgovernorin2010,thebusinesswasthesourceofethicschargesmadeagainsttheformerHallCountycongressman.DealandCronanretainownershipofthelandThesalvagebusinesscontractedwiththestatetoprovidespaceforstateemployeestoinspectrebuiltvehicles.Allensaidhedecidedtosellthebusinessbecausehewasofferedagooddeal.Hedeclinedtonamethepurchaserortheprice.AttemptstoreachRandyEvans,Deal'sattorney,athisplaceofbusinessandthroughemailwereunsuccessful.'Thegovernor'sIguess69or70(heturns71onAug.25),'Allensaid.'Heprobablywouldn'tbeinabusinesslikethatforeveranywayandthepeoplethatcamealongthatwantedtobuyithadastronginterestinit,sowethoughtitwasagoodofferandjustdecidedtotakeitwhilewehadtheopportunityto.'viaGov.DealsellsGainesvilleautosalvagebusiness[1].GeorgiaPunditGeorgiaPolitics,CampaignsandElections[2][1]:http://www.gainesvilletimes.com/section/6/article/85762/[2]:http://gapundit.com

LOADDATE:July12,2013

LANGUAGE:English

PUBLICATIONTYPE:WebBlog

JOURNALCODE:GAPU117413

Copyright2013NewstexLLCAllRightsReserved

EXHIBIT 9

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10-Q 1 d30311.htm 10-Q

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q(Mark One)

!! Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended April 30, 2013

OR

"" Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission file number: 0-23255

COPART, INC.(Exact name of registrant as specified in its charter)

Delaware 94-2867490 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.)

14185 Dallas Parkway, Dallas, Texas 75254(Address of principal executive offices) (Zip Code)

(972) 391-5000

Registrant's telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. YES ! NO "

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files). YES ! NO "

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ! Accelerated filer " Non-accelerated filer " Smaller reporting company " (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES " NO !

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NOTE 14 - Subsequent Events

On May 14, 2013, the Company purchased the assets of Gainesville Salvage Disposal, a salvage vehicle auction company located in Gainesville,GA.

On May 30, 2013, the Company acquired Salvage Parent, Inc., which conducts business primarily as Quad City Salvage Auction, Crashed Toys, andDesert View Auto Auction. Combined, these businesses operate at thirty-nine locations in 14 states.

On May 31, 2013, the Company purchased the assets of Auto Salvage Auction, Inc., a salvage vehicle auction company with locations in Davisonand Ionia, MI.

The aggregate purchase price for these acquisitions, which closed subsequent to the quarter, was approximately $77.0 million.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, asamended, (the Exchange Act). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Insome cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "intend," "forecast," "anticipate,""believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. The forward-looking statementscontained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level ofactivity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed orimplied by these statements. These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities LitigationReform Act of 1995. These factors include those listed in Part I, Item 1A."Risk Factors" of this Form 10-Q and those discussed elsewhere in thisForm 10-Q. We encourage investors to review these factors carefully together with the other matters referred to herein, as well as in the other documentswe file with the Securities and Exchange Commission, or SEC. We may from time to time make additional written and oral forward-looking statements,including statements contained in our filings with the SEC. We do not undertake to update any forward-looking statement that may be made from time totime by us or on our behalf.

Although we believe that, based on information currently available to us and our management, the expectations reflected in the forward-lookingstatements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance onthese forward-looking statements. In addition, historical information should not be considered an indicator of future performance.

Overview

We are a leading provider of online auctions and vehicle remarketing services in the United States (U.S.), Canada, the United Kingdom (U.K.), theUnited Arab Emirates (U.A.E.), Brazil and Germany.

We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the Internet through our Virtual Bidding SecondGeneration Internet auction-style sales technology, which we refer to as VB2. Vehicle sellers consist primarily of insurance companies, but also includebanks and financial institutions, charities, car dealerships, fleet operators and vehicle rental companies. We sell the vehicles principally to licensed vehicledismantlers, rebuilders, repair licensees, used vehicle dealers and exporters and, at certain locations, to the general public. The majority of the vehiclessold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or arerecovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. We offer vehicle sellers a full range ofservices that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price.

In the U.S. and Canada (North America), the U.A.E. and Brazil we sell vehicles primarily as an agent and derive revenue primarily from fees paid byvehicle sellers and vehicle buyers as well as related fees for services such as towing and storage. In the U.K., we operate both on a principal basis,purchasing the salvage vehicle outright from the insurance companies and reselling the vehicle for our own account, and as an agent. In Germany, wederive revenue from sales listing fees for listing vehicles on behalf of many German insurance companies.

Our revenues consist of sales transaction fees charged to vehicle sellers and vehicle buyers, transportation revenue, purchased vehicle revenues, andother remarketing services. Revenues from sellers are generally generated either on a fixed fee contract basis where we collect a fixed amount for sellingeach vehicle regardless of the selling price of the vehicle or, under our Percentage Incentive Program, or PIP, where our fees are generally based on apredetermined percentage of the vehicle sales price. Under the consignment, or fixed fee program, we generally charge an additional fee for titleprocessing and special preparation. Although sometimes included in the consignment fee, we may also charge additional fees for the cost of transportingthe vehicle to our facility, storage of the vehicle, and other incidental costs. Under the consignment programs, only the fees associated with vehicleprocessing are recorded in revenue, not the actual sales price (gross proceeds). Sales transaction fees also include fees charged to vehicle buyers forpurchasing vehicles, storage, loading and annual registration. Transportation revenue includes charges to sellers for towing vehicles under certaincontracts and towing charges assessed to buyers for delivering vehicles. Purchased vehicle revenue includes the gross sales price of the vehicle which wehave purchased or are otherwise considered to own and is primarily generated in the U.K.

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EXHIBIT 10

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10-K 1 d30512.htm 10-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: July 31, 2013

OR

!! TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from to

Commission file number 0-23255

Copart, Inc.(Exact name of registrant as specified in its charter)

Delaware 94-2867490(State or other jurisdiction of

incorporation or organization) (I.R.S. Employer

Identification Number)14185 Dallas Parkway, Suite 300, Dallas, Texas

(Address of principal executive offices) 75254

(Zip code)Registrants telephone number, including area code:

(972) 391-5000Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of each exchange on which registered

Common Stock, $0.0001 par value The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes [X] No !

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes ! No [X]

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As part of our overall expansion strategy, our objective is to increase our revenues, operating profits, and market share in thevehicle sales industry. To implement our growth strategy, we intend to continue to do the following:

Acquire and Develop New Vehicle Storage Facilities in Key Markets Including Foreign Markets

Our strategy is to offer integrated services to vehicle sellers on a national or regional basis by acquiring or developing facilities innew and existing markets. We integrate our new acquisitions into our global network and capitalize on certain operating efficienciesresulting from, among other things, the reduction of duplicative overhead and the implementation of our operating procedures.

The following table sets forth facilities that we have acquired or opened from August 1, 2010 through July 31, 2013:

Locations

Acquisition orGreenfield

Date

Geographic Service Area

Homestead, Florida Greenfield September 2010 United StatesHartford City, Indiana Acquisition March 2011 United StatesAtlanta, Georgia Greenfield August 2011 United StatesBurlington, North Carolina Greenfield July 2012 United StatesWebster, New Hampshire Greenfield September 2012 United StatesGainesville, Georgia Acquisition May 2013 United StatesDavison, Michigan Acquisition May 2013 United StatesIonia, Michigan Acquisition May 2013 United StatesKincheloe, Michigan Acquisition May 2013 United StatesSalvage Parent, Inc.* Acquisition May 2013 United StatesBirmingham, England Acquisition March 2011 United KingdomEdmonton, Canada Acquisition May 2012 CanadaCalgary, Canada Acquisition May 2012 CanadaDubai, U.A.E. Acquisition August 2012 United Arab EmiratesEmbu, Brazil Acquisition November 2012 BrazilPirapora, Brazil Acquisition November 2012 BrazilOsasco, Brazil Acquisition November 2012 BrazilCastelo Branco, Brazil Acquisition November 2012 BrazilVila Jaguara, Brazil Acquisition November 2012 BrazilEttlingen, Germany Acquisition November 2012 GermanyCordoba, Spain Acquisition June 2013 Spain

* Salvage Parent, Inc. conducts business primarily as Quad City Salvage Auction, Crashed Toys, and Desert View Auto Auctions.Combined, these businesses operate at 39 locations in 14 states.

5

Pursue National and Regional Vehicle Supply Agreements

Our broad national presence enhances our ability to enter into local, regional or national supply agreements with vehicle sellers.We actively seek to establish national and regional supply agreements with insurance companies by promoting our ability to achievehigh net returns and broader access to buyers through our national coverage and electronic commerce capabilities. By utilizing ourexisting insurance company seller relationships, we are able to build new seller relationships and pursue additional supply agreementsin existing and new markets.

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Pursuant to ASC 350, IntangiblesGoodwill and Other, we are required to annually test goodwill and intangible assets withindefinite lives to determine if impairment has occurred. Additionally, interim reviews must be performed whenever events or changesin circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has occurred, we arerequired to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangibleassets and the implied fair value of the goodwill or other intangible assets in the period the determination is made. The testing ofgoodwill and other intangible assets for impairment requires us to make significant estimates about our future performance and cashflows, as well as other assumptions. These estimates can be affected by numerous factors, including changes in the definition of abusiness segment in which we operate; changes in economic, industry or market conditions; changes in business operations; changes incompetition; or potential changes in the share price of our common stock and market capitalization. Changes in these factors, orchanges in actual performance compared with estimates of our future performance, could affect the fair value of goodwill or otherintangible assets, which may result in an impairment charge. For example, continued deterioration in worldwide economic conditionscould affect these assumptions and lead us to determine that goodwill impairment is required with respect to our acquisitions in NorthAmerica, U.K., Brazil, Germany, U.A.E. or Spain. We cannot accurately predict the amount or timing of any impairment of assets.Should the value of our goodwill or other intangible assets become impaired, it could have a material adverse effect on ourconsolidated results of operations and could result in our incurring net losses in future periods.

An adverse outcome of a pending Georgia sales tax audit could have a material adverse effect on our consolidated results ofoperations and financial condition.

The Georgia Department of Revenue, or DOR, conducted a sales and use tax audit of our operations in Georgia for the period fromJanuary 1, 2007 through June 30, 2011. As a result of the audit, the DOR issued a notice of proposed assessment for uncollected salestaxes in which it asserted that we failed to remit sales taxes totaling $73.8 million, including penalties and interest. In issuing the noticeof proposed assessment, the

23

DOR stated its policy position that sales for resale to non-U.S. registered resellers are subject to Georgia sales and use tax.

We have engaged a Georgia law firm and outside tax advisors to review the conduct of our business operations in Georgia, thenotice of assessment, and the DORs policy position. In particular, our outside legal counsel has provided us with an opinion that oursales for resale to non-U.S. registered resellers should not be subject to Georgia sales and use tax. In rendering its opinion, our counselnoted that non-U.S. registered resellers are unable to comply strictly with technical requirements for a Georgia certificate of exemptionbut concluded that our sales for resale to non-U.S. registered resellers should not be subject to Georgia sales and use taxnotwithstanding this technical inability to comply.

Based on the opinion from our outside law firm and advice from outside tax advisors, we have adequately provided for thepayment of this assessment in our consolidated financial statements. We believe we have strong defenses to the DORs notice ofproposed assessment and intend to defend this matter. We have filed a request for protest or administrative appeal with the State ofGeorgia. There can be no assurance, however, that this matter will be resolved in our favor or that we will not ultimately be required tomake a substantial payment to the Georgia DOR. We understand that Georgia law and DOR regulations are ambiguous on many of thepoints at issue in the audit, and litigating and defending the matter in Georgia could be expensive and time-consuming and result insubstantial management distraction. If the matter were to be resolved in a manner adverse to us, it could have a material adverse effecton our consolidated results of operations and financial position.

New accounting pronouncements or new interpretations of existing standards could require us to make adjustments toaccounting policies that could adversely affect the consolidated financial statements.

The Financial Accounting Standards Board, the Public Company Accounting Oversight Board, and the SEC, from time to timeissue new pronouncements or new interpretations of existing accounting standards that require changes to our accounting policies andprocedures. To date, we do not believe any new pronouncements or interpretations have had a material adverse effect on ourconsolidated results of operations and financial position, but future pronouncements or interpretations could require a change or

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contract vehicle towing, insurance, fuel, equipment maintenance and repair, and costs of vehicles sold under purchase contracts. Costsassociated with general and administrative expenses consist primarily of executive management, accounting, data processing, salespersonnel, human resources, professional fees, research and development and marketing expenses.

Acquisitions and New Operations

We have experienced significant growth in facilities as we have acquired 55 facilities and established four new facilities since thebeginning of fiscal 2011 through July 31, 2013. All of these acquisitions have been accounted for using the purchase method ofaccounting.

As part of our overall expansion strategy of offering integrated services to vehicle sellers, we anticipate acquiring and developingfacilities in new regions, as well as the regions currently served by our facilities. We believe that these acquisitions and openingsstrengthen our coverage as we have facilities located in North America, the U.K., the U.A.E., Germany, Spain, and Brazil, and are ableto provide national coverage for our sellers.

The following table sets forth facilities that we have acquired or opened from August 1, 2010 through July 31, 2013:

Locations

Acquisitionor Greenfield

Date

Geographic Service Area

Homestead, Florida Greenfield September 2010 United StatesHartford City, Indiana Acquisition March 2011 United StatesAtlanta, Georgia Greenfield August 2011 United StatesBurlington, North Carolina Greenfield July 2012 United StatesWebster, New Hampshire Greenfield September 2012 United StatesGainesville, Georgia Acquisition May 2013 United StatesDavison, Michigan Acq

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