UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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| KAR AUCTION SERVICES, INC. | ||||
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2014 Proxy Statement and
Notice of 2015 Annual Meeting
and
Proxy Statement
Annual Meeting of Stockholders
June 8, 2016
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 | April 28, 2016 Dear Fellow Stockholder: I would like to cordially invite you to attend KAR Auction Services, Inc.'s ("KAR" or the "Company") annual meeting of stockholders. The meeting will be held on June 8, 2016, at 9:00 a.m., Eastern Daylight Time, at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204. As a KAR stockholder, your vote is important. The matters to be acted upon are described in the notice of annual meeting of stockholders and the proxy statement. Even if you are planning to attend the annual meeting in person, you are strongly encouraged to vote your shares through one of the methods described in the proxy statement. I am pleased to report that 2015 was an excellent year for KAR. We met or exceeded our key financial targets and delivered solid year-over-year growth in total vehicles sold, revenues, adjusted EBITDA and adjusted net income. As an established market leader with an experienced management team, we believe that we are well-positioned to continue driving growth with solid operating performance and disciplined capital investments. We have a comprehensive capital allocation plan for increasing stockholder value. We are focused on return of capital to our stockholders and accretive investments in the business, including the acquisition of physical auctions and new technology platforms, as well as enhancing current technologies. In 2015, we announced the acquisition of both physical auctions and technology companies, including the purchase of our first European business. We are proud that through share buybacks and dividends, in 2015 we returned approximately $380 million to stockholders and invested approximately $253 million in our business through capital expenditures and strategic acquisitions. I would like to express our appreciation for your continued support of KAR. Sincerely,
James P. Hallett Chairman of the Board and
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This proxy statement is dated April 23, 201528, 2016 and is first being distributed to stockholders on or about April 23, 2015.28, 2016.
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13085 Hamilton Crossing Boulevard
Carmel, Indiana 46032
| NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
| Time and Date | 9:00 a.m., Eastern Daylight Time, on June | |
| Place | ||
| Items of Business | Proposal No. 1: To elect | |
Proposal No. 2: To approve the amendment and restatement of the Company's Amended and Restated Certificate of Incorporation to provide that the Company's stockholders may remove any director from office, with or without cause, and other ministerial changes. | ||
Proposal No. 3: To ratify the appointment of KPMG LLP as our independent registered public accounting firm for | ||
To transact any other business as may properly come before the meeting or any adjournments or postponements thereof. | ||
| Record Date | You are entitled to vote at the annual meeting and at any adjournments or postponements thereof if you were a stockholder of record at the close of business on April 13, | |
| Voting by Proxy | Please submit your proxy card as soon as possible so that your shares can be voted at the annual meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions on your enclosed proxy card. | |
| On Behalf of the Board of Directors, | ||
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| April Carmel, Indiana | Rebecca C. Polak Executive Vice President, General Counsel and Secretary |
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Notice of Internet Availability of Proxy Materials for the Annual Meeting
The proxy statement for the annual meeting and the annual report to stockholders for the fiscal year ended December 31, 2014,2015, each of which is being provided to stockholders prior to or concurrently with this notice, are also available to you electronically via the Internet. We encourage you to review all of the important information contained in the proxy materials before voting. To view the proxy statement and annual report to stockholders on the Internet, visit the "Investor Relations" sectionpage of our website, under the "Proxy Statement"Material" link at www.karauctionservices.com.www.karauctionservices.com.
| TABLE OF CONTENTS |
| PROXY STATEMENT SUMMARY | 1 | |
ANNUAL MEETING OF STOCKHOLDERS | 1 | |
ITEMS TO BE VOTED ON AT ANNUAL MEETING OF STOCKHOLDERS | 1 | |
KAR AUCTION SERVICES 2015 HIGHLIGHTS | 3 | |
| ELECTION OF DIRECTORS: PROPOSAL NO. 1 | 7 | |
DIRECTORS ELECTED ANNUALLY | 7 | |
DIRECTOR INDEPENDENCE | 7 | |
BOARD NOMINATIONS AND DIRECTOR NOMINATION PROCESS | 7 | |
DIVERSITY | 8 | |
INFORMATION REGARDING THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS | 8 | |
| BOARD OF DIRECTORS STRUCTURE AND CORPORATE GOVERNANCE | 18 | |
ROLE OF THE BOARD OF DIRECTORS | 18 | |
BOARD LEADERSHIP | 18 | |
BOARD OF DIRECTORS MEETINGS AND ATTENDANCE | 19 | |
COMMITTEES OF THE BOARD OF DIRECTORS | 19 | |
BOARD OF DIRECTORS' RISK OVERSIGHT | 21 | |
CORPORATE GOVERNANCE DOCUMENTS | 22 | |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION | 22 | |
COMMUNICATIONS WITH THE BOARD OF DIRECTORS | 22 | |
EXECUTIVE SESSIONS | 23 | |
| DIRECTOR COMPENSATION | 24 | |
| BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK | 27 | |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 28 | |
| AMENDMENT AND RESTATEMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION: PROPOSAL NO. 2 | 29 | |
PROPOSAL | 29 | |
| RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: PROPOSAL NO. 3 | 30 | |
PROPOSAL | 30 | |
REPORT OF THE AUDIT COMMITTEE | 31 | |
FEES PAID TO KPMG LLP | 32 |
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 32 | |
| COMPENSATION DISCUSSION AND ANALYSIS | 33 | |
OVERVIEW | 33 | |
EXECUTIVE SUMMARY | 34 | |
COMPENSATION PHILOSOPHY AND OBJECTIVES | 38 | |
THE ROLE OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE OFFICERS IN DETERMINING EXECUTIVE COMPENSATION | 38 | |
ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY AND OBJECTIVES | 40 | |
COMPENSATION POLICIES AND OTHER INFORMATION | 49 | |
RESULTS OF SAY ON PAY VOTES AT 2014 ANNUAL MEETING | 51 | |
COMPENSATION COMMITTEE REPORT | 51 | |
| ANALYSIS OF RISK IN THE COMPANY'S COMPENSATION STRUCTURE | 52 | |
| SUMMARY COMPENSATION TABLE FOR 2015 | 53 | |
| GRANTS OF PLAN-BASED AWARDS FOR 2015 | 55 | |
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2015 | 56 | |
| OPTION EXERCISES DURING FISCAL YEAR 2015 | 58 | |
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL | 59 | |
EQUITY-BASED AWARDS—STOCK INCENTIVE PLAN AND OMNIBUS PLAN | 59 | |
ANNUAL CASH INCENTIVE AWARDS—OMNIBUS PLAN | 61 | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL—TABLE | 62 | |
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS | 64 | |
| CERTAIN RELATED PARTY RELATIONSHIPS | 68 | |
REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS | 68 | |
| REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS | 69 | |
NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS | 69 | |
| QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING | ||
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This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement before voting. For more complete information regarding the Company's 20142015 performance, please review the Company's Annual Report on Form 10-K for the year ended December 31, 2014.2015.
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| Date and Time: | 9:00 a.m., Eastern Daylight Time, on June 8, 2016 | |
| Location: | ||
| Record Date: | ||
| Stockholders of record as of the close of business on | ||
| NYSE Symbol: | KAR | |
| Registrar and Transfer Agent: | American Stock Transfer & Trust Company, LLC |
| ITEMS TO BE VOTED ON AT ANNUAL MEETING OF STOCKHOLDERS |
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| Proposal | Board of Directors' Recommendation | Page | ||||
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| 1. | Election of each of the nine director nominees | FOR | 7 | |||
2. | Amendment and restatement of the Company's Amended and Restated Certificate of Incorporation to provide that stockholders may remove any director from office, with or without cause, and other ministerial changes | FOR | 29 | |||
3. | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2016 | FOR | 30 | |||
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Board Nominees (pages 8-17)
| Name | Age | Director Since | Independent | Primary Occupation | Committee Membership*** | |||||
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| Todd F. Bourell | 46 | 2015 | Yes | Managing Partner of WLJ Capital, LLC | NCGC | |||||
Donna R. Ecton | 69 | 2013 | Yes | Chairman and Chief Executive Officer of EEI Inc. | CC (Chair), AC | |||||
James P. Hallett* | 63 | 2007 | No | Chairman of the Board and Chief Executive Officer of KAR | — | |||||
Mark E. Hill | 60 | 2014 | Yes | Managing Partner of Collina Ventures, LLC | NCGC (Chair), RC | |||||
J. Mark Howell | 51 | 2014 | Yes | Chief Operating Officer of Angie's List, Inc. | RC (Chair), CC | |||||
Lynn Jolliffe | 64 | 2014 | Yes | Human Capital and Talent Management Consultant | AC, CC | |||||
Michael T. Kestner | 62 | 2013 | Yes | Building Products and Automotive Industry Consultant | AC (Chair), RC | |||||
John P. Larson** | 53 | 2014 | Yes | Chief Executive Officer of Bestop, Inc. | CC, RC | |||||
Stephen E. Smith | 67 | 2013 | Yes | Automotive Industry Consultant | AC, NCGC |
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| KAR AUCTION SERVICES 2015 HIGHLIGHTS |
Business Highlights
For the year ended December 31, 2014,2015, KAR Auction Services, Inc. (the "Company," "KAR" or "KAR Auction Services") again delivered solid growth in volume of total vehicles sold, revenues, adjusted EBITDA and Adjusted EBITDA.adjusted net income. Specific highlights for fiscal 20142015 included:
Net income increased 150% from $67.7 million ($0.48 per diluted share) to $169.3 million ($1.19 per diluted share).
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We increased
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Corporate Governance (pages 18-23)
We are committed to high standards of ethical and business conduct and strong corporate governance practices. This commitment is highlighted by the practices described below as well as the information contained on our website atwww.karauctionservices.com on the "Investor Relations" page under the link "Corporate Governance":
Annual Elections: Our directors are elected annually for one year terms.
Majority Voting: We maintain a majority voting standard for uncontested director elections with a policy for directors to tender their resignation should a majority of the votes cast not be in their favor.
Director Independence: NineEight of our tennine director nominees are independent, and all committees of our Board of Directors are comprised entirely of independent directors.
Executive Sessions: Our independent directors meet in executive session at regularly scheduled Board of Directors' meetings.
Board Leadership: We have a lead independent director who presides over executive sessions of independent directors and serves as the principal liaison between the independent directors and the Company's Chief Executive Officer and Chairman of the Board.
Board Diversity: Twenty percent of our Board of Directors is comprised of women.
Robust Equity Ownership Requirements: In 2015, we adopted stock ownership guidelines that are applicable to our non-employee directors. The stock ownership guideline for our non-employee directors is three times their annual base cash retainer.
Robust Equity Retention Requirement: In 2015, we adopted an equity retention requirement that is applicable to non-employee directors. All shares of our common stock granted on and after January 1, 2014 must be held for four years after the grant while serving as a director, regardless of whether the stock ownership guideline has been met. All shares of our common stock granted on and after January 1, 2014 must be held for six months after service as a director has ended with the Company.
Board of Directors Risk Oversight: OurIn July 2015, the Board of Directors established a Risk Committee of the Board of Directors to assist the Board of Directors in its oversight of:
The Risk Committee provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to aanother committee of the Board of Directors (in which case the Board of DirectorsRisk Committee may maintain oversight over such risks through the receipt of reports from thesuch committees). The Audit Committee maintains initial oversight over risks related to the integrity of our financial statements; internal controls over financial reporting and disclosure controls and procedures (including the performance of our internal audit function); the performance of the independent registered public accounting firm; and oversees our responses to ethics issues arising from our whistleblower hotline. The Compensation Committee maintains oversight over risks related to our compensation practices. The Nominating and Corporate Governance Committee monitors potential risks relating to the effectiveness of the Board of Directors, notably director succession, composition of the Board of Directors and the principal policies that guide our governance.
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Executive Compensation (pages 33-67)
We maintain a compensation program structured to achieve a close connection between executive pay and companyCompany performance. We believe that this strong pay-for-performance orientation has served us well in recent years, particularly as we've moved forward following the sale by our former equity sponsors of all of their holdings of our common stock in late 2013. For more information regarding our named executive officer compensation, see "Compensation Discussion and Analysis" and the compensation tables that follow such section.
Historically, we have demonstrated close alignment between our total stockholder return (TSR) performance and the compensation of our Chief Executive Officer, as shown in the chart on page 41.
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13085 Hamilton Crossing BoulevardCarmel, Indiana 46032
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| Independent Compensation Committee: All of the members of our Compensation Committee are independent under NYSE rules. | | | Maximum payout caps for annual cash incentive compensation and performance restricted stock units (PRSUs). | ||
✔ | | Moderate change-in-control benefits: Change-in-control severance benefits are | | ✔ | | Independent compensation consultants: In 2015, our Compensation Committee engaged Semler Brossy Consulting Group LLC as its independent compensation consultant. |
✔ | | Clawback of certain compensation if restatement and intentional misconduct: Our clawback policy provides for the recovery of incentive compensation in the event we are required to | | ✔ | | Robust equity retention requirement: In 2015, we adopted an equity retention requirement that is applicable to senior executives, including our named executive officers. Our named executive officers are required to hold 100% of net shares of Company stock received under awards granted on or after January 1, 2015 for at least 12 months after vesting, regardless of whether the |
✔ | | Robust equity ownership requirements: In 2015, we adopted stock ownership guidelines that are applicable to senior executives, including our named executive officers. The stock ownership guideline for our CEO is five times his annual base salary. | | |
WE DO NOT:
| ✘ | | Allow dividends or dividend equivalents to be paid on unvested PRSUs: Dividend equivalents are accrued but not paid on PRSUs until (i) the | | ✘ | | Allow hedging of KAR |
| Allow pledging of KAR securities: As part of our Insider Trading Policy, we prohibit the pledging of Company stock. | | ✘ | | Provide excessive executive perquisites: We provide only a limited number of perquisites to attract talented executives and to retain our current executives. | |
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| ELECTION OF DIRECTORS: PROPOSAL NO. 1 |
| DIRECTORS ELECTED ANNUALLY |
Our Board of Directors has nominated the tennine individuals named below to stand for election to the Board of Directors at the annual meeting. Mr. Birtwell,Formanek, who currently serves on our Board of Directors, is not standing for re-election at the annual meeting. KAR Auction Services'In connection with Mr. Formanek's retirement from the Board of Directors, the Board of Directors has approved by resolution to decrease of the size of the Board of Directors from ten directors to nine directors effective at the annual meeting. The Company's directors are elected each year by the stockholders at the annual meeting. We do not have a staggered or classified board. Each director's term will last until the 20162017 annual meeting of stockholders and until such director's successor is duly elected and qualified, or such director's earlier death, resignation or removal. Each director nominee must receive the affirmative vote of a majority of the votes cast in the election of directors at the annual meeting to be elected (i.e., the number of shares voted "FOR" a director nominee must exceed the number of votes cast "AGAINST" such nominee).
| DIRECTOR INDEPENDENCE |
The Board of Directors is responsible for determining the independence of our directors. Under the NYSE listing standards, a director qualifies as independent if the Board of Directors affirmatively determines that the director has no material relationship with us. While the focus of the inquiry is independence from management, the Board is required to broadly consider all relevant facts and circumstances in making an independence determination. Based upon its evaluation, our Board has affirmatively determined that the following directors and director nominees meet the standards of "independence" established by the NYSE: Ryan M. Birtwell, Todd F. Bourell, Donna R. Ecton, Peter R. Formanek, Mark E. Hill, J. Mark Howell, Lynn Jolliffe, Michael T. Kestner, John P. Larson and Stephen E. Smith. James P. Hallett, our CEOChief Executive Officer and Chairman of the Board, is not an independent director.
| BOARD NOMINATIONS AND DIRECTOR NOMINATION PROCESS |
The Board of Directors is responsible for nominating members for election to the Board of Directors and for filling vacancies on the Board of Directors that may occur between the annual meetings of stockholders. The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommending candidates to the Board of Directors for board membership. When formulating its Board of Directors membership recommendations, the Nominating and Corporate Governance Committee may also consider advice and recommendations from others, including stockholders, as it deems appropriate.
Board candidates also are selected based upon various criteria including experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board of Directors. Board members are expected to prepare for, attend and participate in all Board of Directors and applicable committee meetings and the Company's annual meetings of stockholders.
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In accordance with its charter, the Board of Directors also considers candidates for election as a director of the Company recommended by any stockholder, provided that the recommending stockholder follows the procedures set forth in Section 5 of the Company's Second Amended and Restated By-Laws for nominations by stockholders of persons to serve as directors, including the requirements of timely notice and certain information to be included in such notice. The Board of Directors generally evaluates such candidates in the same manner by which it evaluates other director candidates considered by the Board of Directors.
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An employment agreement entered into on February 27, 2012, between the Company and James P. Hallett, the Company's CEO and Chairman of the Board, provides that Mr. Hallett shall be entitled to serve as a member of the Board of Directors for so long as the employment agreement is in effect.
| DIVERSITY |
The Nominating and Corporate Governance Committee and the Board of Directors believe that diversity along multiple dimensions, including opinions, skills, perspectives, personal and professional experiences and other differentiating characteristics, is an important element of its nomination recommendations. The Nominating and Corporate Governance Committee has not identified any specific minimum qualifications which must be met for a person to be considered as a candidate for director. However, Board candidates are selected based upon various criteria including experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board of Directors. Although the Board of Directors does not have a formal diversity policy, the Nominating and Corporate Governance Committee and Board of Directors review these factors, including diversity, in considering candidates for board membership.
| INFORMATION REGARDING THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS |
The following information is furnished with respect to each nominee for election as a director. NineAll of the nominees are currently directors. Each of the nominees has consented to being named in this proxy statement and to serve as a director if elected. If a nominee is unavailable to serve as a director, your proxies will have the authority and discretion to vote for another nominee proposed by the Board of Directors or the Board of Directors may reduce the number of directors to be elected at the annual meeting. The ages of the nominees are as of the date of the annual meeting, June 3, 2015.8, 2016.
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Todd F. Bourell
Independent Director
Current Board Committee: |
• Managing Partner of WLJ Capital, LLC, a public equities investment firm he founded in January 2015. • Partner/Analyst at ValueAct Capital, LLC, a privately held hedge fund, from May 2001 to December 2014. • Global Industry Analyst at Wellington Management Company, a worldwide private investment management company, from September 2000 to May 2001. • Partner/Analyst at Peak Investment L.P., a private investment firm, from July 1994 to July 1998. • Served as ValueAct Capital, LLC's representative on the board of directors of several publicly-traded companies, including • Graduate of Harvard College and the University of Pennsylvania (MBA). |
Skills and Qualifications
| ✔ | Extensive experience in finance, mergers and acquisitions and investment management, including experience in evaluating companies' strategies, operations and financial performance. | |
| ✔ | Background provides perspective on institutional investors' approach to company performance, capital allocation and corporate governance. | |
| ✔ | Extensive knowledge of IAA's business as a former owner (through ValueAct Capital, LLC) and board member on IAA's board of directors. | |
| ✔ | Public company board experience. |
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Donna R. Ecton
Independent Director
Age: Current Board
| Career Highlights • Chairman and Chief Executive Officer of EEI Inc., a management consulting firm she founded in July 1998 to provide private equity firms with due diligence and market and operational assessments of companies being considered for acquisition, as well as turnaround management of troubled portfolio companies. • Director (1994 to 1998) and Chief Operating Officer (1996 to 1998) of PetsMart, Inc. • Chief Executive Officer of a number of companies, including Business Mail Express, Inc. (1995 to 1996) • Held senior corporate management positions at Nutri/System, Inc., Campbell Soup Company and Nordemann Grimm, Inc. • Began career in banking at Chemical Bank and Citibank N.A. in New York City, running the Upper Manhattan middle market lending business and midtown Manhattan's retail banks. • Previous public company board of director positions have included Mellon Bank Corporation and Mellon Bank N.A., Mellon PSFS, H&R Block, Inc., Tandy Corporation, Barnes Group Inc. and Vencor, Inc. • Elected to and served on the Harvard University's Board of Overseers. • Member of the Council on Foreign Relations in New York City. • Serves on the NYSE Governance Services Advisory Council. • Graduate of Wellesley College and the Harvard Graduate School of Business Administration (MBA). Other Current Public Company Directorships: Director of CVR GP, LLC, the general partner of CVR Partners, LP, a nitrogen fertilizer business, since March 2008. Other Public Company Directorships in Last Five Years: Former Director and Non-Executive Chairman of the Board of Body Central Corp. (2011 to 2014). |
Skills and Qualifications
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Peter R. Formanek
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| ✔ | Experience in running multiple location businesses not only in the | |
| ✔ | Significant strategy and risk assessment experience developed in her roles as a
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| ✔ | Substantial financial experience | |
| ✔ | Current and prior service on
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Skills and Qualifications
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James P. Hallett
Director
Age: Chairman of the Board and | Career Highlights • Chairman of the Company since December 2014 and Chief Executive Officer since September 2009. • Chief Executive Officer and President of ADESA from April 2007 to September 2009. • President of Columbus Fair Auto Auction, a large independent automobile auction located in Columbus, Ohio, from May 2005 to April 2007. • After selling his auctions to ADESA in 1996, Mr. Hallett held various senior executive leadership positions with ADESA between 1996 • Founded and owned two automobile auctions in Canada from 1990 to 1996. • Graduate of Algonquin College. • Managed and then owned a number of new car franchise dealerships for 15 years. • Winner of multiple industry awards, including NAAA Pioneer of the Year in 2008. • Recognized as the EY Entrepreneur of the Year 2014 National Services Award Winner and one of Northwood University's 2015 Outstanding Business Leaders. |
Skills and Qualifications
| ✔ | Committed and deeply engaged leader with over 20 years of experience in key leadership roles throughout the Company and over 35 years of experience in the industry. | |
| ✔ | As Chief Executive Officer, Mr. Hallett has a thorough and in-depth understanding of the Company's business and industry, including its employees, business units, customers and investors, which provides an additional perspective to our Board of Directors. | |
| ✔ | Utilizes strong communication skills to guide Board discussions and keep our Board of Directors apprised of significant developments in our business and industry; including our risk management practices, strategic planning and development. |
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Mark E. Hill
Independent Director
Age: Current Board
| Career Highlights • Managing Partner of Collina Ventures, LLC, a private investment company that invests in software and technology companies, since 2006. • Co-founder and Chairman of Bluelock, LLC, a privately held infrastructure as a services company, since 2006. • Co-Founder, President and Chief Executive Officer of Baker Hill Corporation, a banking industry software and services business, from 1985 to 2006. Baker Hill Corporation was acquired by Experian PLC, a global information solutions company, in 2005. • Graduate of the University of Notre Dame and Indiana University (MBA). Other Current Public Company Directorships: Lead Independent Director of Interactive Intelligence Group, Inc., a global software business, since 2005. |
Skills and Qualifications
| ✔ | Significant executive leadership and management experience leading and owning a software and technology-based business provides our Board of Directors with expertise in technology, innovation, and strategic investments. | |
| ✔ | Extensive experience as an investor and mentor to numerous early stage software and technology companies provides entrepreneurial perspective to the Board. | |
| ✔ | Key leadership experience in numerous central Indiana business and community service organizations, including TechPoint, the Central Indiana Community Foundation, the Orr Fellowship and the local Teach For America board. | |
| ✔ | Public company board experience, including serving as a lead independent director. |
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J. Mark Howell
Independent Director
Age: Current Board
| Career Highlights • Chief Operating Officer of Angie's List, Inc., a publicly-traded, United States-based, leading consumer web services business connecting more than three million consumers to highly-rated local service providers via its online marketplace, since March 2013. • President, Ingram Micro North America Mobility of Ingram Micro Inc., a technology distribution company, from 2012 to 2013. • President, BrightPoint Americas of BrightPoint, Inc., a distributor of mobile devices for phone companies, including Chief Operating Officer, Executive Vice President and Chief Financial Officer, from 1994 to 2012. BrightPoint, Inc. was sold to Ingram Micro Inc. in 2012. • Vice President and Corporate Controller of ADESA, Inc. from August 1992 to July 1994. • Audit Staff and Senior Staff at Ernst & Young LLP. • Graduate of the University of Notre Dame (BBA in Accounting). |
Skills and Qualifications
| ✔ | Extensive senior leadership experience at Internet-based and technology-driven companies provides valuable insight as an increasing amount of the Company's consigned vehicles are sold online. | |
| ✔ | Provides unique, in-depth knowledge of ADESA and its industry as a former employee of ADESA. | |
| ✔ | Substantial financial experience. | |
| ✔ | Certified Public Accountant with experience in public accounting and public companies. |
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Lynn Jolliffe
Independent Director
Age: Current Board Committees:
| Career Highlights • Chief Executive Officer of Jolliffe Solutions, Inc., providing consulting in human capital and talent management since June 2015. • Executive Vice President, Global Human Resources of Ingram Micro Inc., a technology distribution company,
Vice President, Human Resources for the North America region from October 2006 to May 2007.
Served as Regional Vice President, Human Resources and Services for Ingram Micro European Coordination Center from August 1999 to October 2006. • Served in various capacities, including Vice President and Chief Financial Officer with responsibility for human resources, at two Canadian retailers, including Holt Renfrew, from 1985 to 1999. • Began career at Bell Canada and then moved to Bank of Montreal. • Graduated from Queens University and University of Toronto (MBA). |
Skills and Qualifications
| ✔ | Extensive functional and leadership experience in finance, human resources and general management. | |
| ✔ | Deep understanding of business drivers from the financial, operational and people perspective gained from experience in multiple industries across three continents. | |
| ✔ | Diversity in viewpoint and international business experience as she has lived and worked in U.S., Canada and abroad. | |
| ✔ | Significant experience with executive compensation decisions, strategies and policies for the acquisition and development of employee talent. |
| | | |
Michael T. Kestner
Independent Director
Age: Current Board Committees:
| Career Highlights • Consultant in the building products and automotive industry since December 2015. • Chief Financial Officer of Building Materials Holding Corporation, a building products company, • Partner in FocusCFO, LLC, a consulting firm providing part-time CFO services, from April 2012 to August 2013. • Executive Vice President, Chief Financial Officer and a director of Hilite International, Inc., an automotive supplier of powertrain parts, from October 1998 to July 2011. • Chief Financial Officer of Sinter Metals, Inc., a supplier of metal power precision components, from 1995 to 1998. • Served in various capacities at Banc One Capital Partners, Wolfensohn Ventures LP and as a senior audit manager at KPMG LLP. • Graduated from Southeast Missouri State University. |
Skills and Qualifications
| ✔ | Over 20 years as a CFO provides valuable experience and perspective as Chair of the Audit Committee. | |
| ✔ | Brings experience as the former CFO of a large, United States-based company which includes experience with complex capital structures and mergers and acquisitions. | |
| ✔ | Extensive experience in financial analysis and financial statement preparation. | |
| ✔ | Management experience in the automotive industry both domestically and internationally provides him with additional insight into financial and business matters that are important to the Company. | |
| ✔ | Certified Public Accountant with experience in public accounting and public companies. |
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John P. Larson
Independent Director
Age: Lead Independent Director Current Board Committees:
| Career Highlights • Chief Executive Officer of Bestop, Inc., a leading manufacturer of soft tops and accessories for Jeep vehicles, since August 2015. • Chief Executive Officer of Escort Inc., an automotive electronics manufacturer, from January 2008 to January 2014 and prior to that as President and Chief Operating Officer from June 2007 to January 2008. • Served in a number of capacities at General Motors Company from 1986 to 2007, most recently serving as General Manager overseeing operations for the Buick, Pontiac and GMC Divisions from January 2005 to May 2007 and as General Director of Finance (CFO) for U.S. Sales, Service and Marketing Operations from 2001 to 2004. • Led General Motors Company's used car remarketing activity from 1999 to 2000. • Graduated from Northern Illinois University and Purdue University (M.S., Management). |
Skills and Qualifications
| ✔ | Extensive business, management and operational experience as CEO in the automotive aftermarket and as a senior executive at one of the world's largest automakers, General Motors Company, provides him with perspective into the Company's challenges, operations, and strategic opportunities. | |
| ✔ | Extensive experience in automotive remarketing, captive finance (GMAC), rental car program design and automotive dealer activities, as well as an in-depth understanding of the overall automotive business provide him a broad perspective on our industry and key customers. | |
| ✔ | Extensive experience as a senior leader in corporate finance has provided him with key skills, including financial reporting, accounting and control, business planning and analysis and risk management, that are valuable to the oversight of our business. | |
| ✔ | Strong communication and leadership skills allow Mr. Larson to be an effective Lead Independent Director and liaison to the other independent directors. |
| | | |
Stephen E. Smith
Independent Director
Age: Current Board Committees:
| Career Highlights • Consultant in the automotive industry since October 2012. • Senior Vice President, Financial Services of American Honda Finance Corporation, a provider of automobile financing to purchasers, lessees and dealers, from 1985 to October 2012 (including various other positions). • Interim President of the California Council on Economic Education, a not-for-profit organization that provides training and educational materials to California teachers relating to economics and personal finance, from July 2013 to February 2014. • Graduated from California State University, Northridge. |
Skills and Qualifications
| ✔ | Over 25 years of extensive operational and management experience in the automotive industry with particular insight into the financing and leasing of vehicles. | |
| ✔ | Significant expertise in building and developing consumer and commercial financial services business, utilizing strategy development, market analysis, problem solving and performance improvement. | |
| ✔ | Considerable financial skill and expertise. |
| | | |
| BOARD OF DIRECTORS STRUCTURE AND CORPORATE GOVERNANCE |
| ROLE OF THE BOARD OF DIRECTORS |
The Board oversees the Company's Chief Executive Officer and other senior management in the competent and ethical operation of the Company and assures that the long-term interests of the stockholders are being served. The Company's Corporate Governance Guidelines are available on our website at karauctionservices.com/investor-relations/corporate-governance/guidelines.www.karauctionservices.com on the "Investor Relations" page under the link "Corporate Governance." The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the Securities and Exchange Commission (the "SEC").
| BOARD LEADERSHIP |
Neither the Company's Second Amended and Restated By-Laws nor the Company's Corporate Governance Guidelines requires that the Company separate the roles of Chairman of the Board and Chief Executive Officer, and the Board of Directors does not have a policy on whether the same person should serve as both the Chief Executive Officer and Chairman of the Board of Directors, or if the roles must remain separate. The Board of Directors believes that it should have the flexibility to make these determinations from time to time in the way that it believes best to provide appropriate leadership for the Company under then-existing circumstances.
At present, the Board of Directors has chosen to combine the positions of Chief Executive Officer and Chairman of the Board and to appoint a Lead Independent Director. Our Board of Directors believes that having the same person serve in the roles of Chairman of the Board and Chief Executive Officer is appropriate for the Company at this time, as it fosters clear accountability, effective decision making and alignment on corporate strategy. Meanwhile, the appointment of a Lead Independent Director ensures that the Company benefits from effective oversight by its independent directors.
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In connection with the appointment of a Lead Independent Director, the Board of Directors adopted a Lead Independent Director Charter, which sets forth a clear mandate and significant authority and responsibilities, including:
| Board Meetings and Executive Sessions | • The authority to call meetings of the independent members of the Board. •
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| | | |
| Communications | • Serves as principal liaison on Board-wide issues between the independent directors and the Chairman and CEO and facilitates communication generally between and among directors. | |
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| Agendas | • Reviews, in consultation with the Chairman and CEO, the agenda for Board meetings. | |
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| Meeting Schedules | • Reviews, in consultation with the Chairman and CEO, the meeting schedules to assure there is sufficient time for discussion of all agenda | |
• Reviews, in consultation with the Chairman and CEO, information sent to the Board, including the quality, quantity, appropriateness and timeliness of such information. | ||
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| Communicating with Stockholders | • If requested by stockholders, ensures that | |
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| Chairman and CEO Performance Evaluation | • Together with the Compensation Committee of the Board, conducts an annual evaluation of the Chairman and CEO, including an annual evaluation of his or her interactions with the | |
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| BOARD OF DIRECTORS MEETINGS AND ATTENDANCE |
The Board of Directors held seven13 meetings during 2014.2015. All of the incumbent directors attended at least 75% of the meetings of the Board of Directors and Board committees on which they served during 2014.2015. As stated in our Corporate Governance Guidelines, each director is expected to attend all annual meetings of stockholders. All of our current directors attended last year's annual meeting of stockholders either in person.person or by telephone (one director attended by phone).
| COMMITTEES OF THE BOARD OF DIRECTORS |
In 2014,2015, the Board of Directors maintained three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. In addition, the Board of Directors established a Risk Committee in July 2015. Each of our committees operates pursuant to a written charter. Copies of the committee charters, other than the Risk Committee Charter, are available on KAR Auction Services' website atwww.karauctionservices.com on the "Investor Relations" page under the link "Corporate Governance." The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the SEC. The following table sets forth the current membership of each committee:
| Name | Audit Committee | Nominating and Corporate Governance Committee | Compensation Committee | Risk Committee | ||||
| Todd F. Bourell | X | |||||||
| Donna R. Ecton | X | | Chair | | ||||
| Peter R. Formanek | X | |||||||
| James P. Hallett* | ||||||||
| Mark E. Hill | Chair | X | ||||||
| J. Mark Howell | | | X | Chair | ||||
| Lynn Jolliffe | X | X | ||||||
| Michael T. Kestner | Chair | | | X | ||||
| John P. Larson** | X | X | ||||||
| Stephen E. Smith | X | X | | |
*Chief Executive Officer and Chairman of the Board
**Lead Independent Director
A description of each Board committee is set forth below.
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Audit Committee
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Additional Committee Members: J. Mark Howell, Lynn Jolliffe, John P. Larson and Stephen E. Smith
Other Committee Members in 2014: Robert M. Finlayson served as Chairman for the first half of 2014. Peter R. Formanek and Jonathan P. Ward also served on the Audit Committee for a portion of 2014. Messrs. Finlayson and Ward completed their directorships as of the date of last year's annual meeting.
Committee Composition Following the Annual Meeting: We expect that the Audit Committee will be comprised of Donna R. Ecton, Lynn Jolliffe, Michael T. Kestner and Stephen E. Smith, with Mr. Kestner serving as the Chairman.
Meetings Held in 2014: 52015: Five
Primary Responsibilities: Our Audit Committee assists the Board of Directors in its oversight of the integrity of our financial statements, our independent registered public accounting firm's qualifications and independence and the performance of our independent registered public accounting firm. The Audit Committee reviews the audit plans and findings of our independent registered public accounting firm and our internal audit team and tracks management's corrective action plans where necessary; reviews our financial statements, including any significant financial items and changes in accounting policies or practices, with our senior management and independent registered public accounting firm; reviews our financial risk and control procedures, compliance programs and significant tax, legal and regulatory matters; and has the sole discretion to appoint annually our independent registered public accounting firm, evaluate its independence and performance and set clear hiring policies for employees or former employees of the independent registered public accounting firm.
Independence: Each of Messrs. Kestner Howell, Larson and Smith and Ms.Mmes. Ecton and Jolliffe is "financially literate" under the rules of the NYSE, and each of Messrs.Mr. Kestner Howell and LarsonMs. Ecton has been designated as an "audit committee financial expert" as that term is defined by the SEC. In addition, the Board of Directors has determined that each of the current and former members of the Audit Committee meets or met during their tenure on the committee, the standards of "independence"
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established by the NYSE and is "independent" under the independence standards for audit committee members adopted by the SEC.
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Compensation Committee
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Additional Committee Members: Lynn Jolliffe and John P. Larson
Other Committee Members in 2014: Church M. Moore served as Chairman for the first half of 2014. Mr. Moore completed his directorship as of the date of last year's annual meeting. Peter Formanek served on the Compensation Committee throughout 2014 and as Chairman for the second half of 2014 through March 12, 2015.
Committee Composition Following the Annual Meeting: Following the annual meeting, we expect that the CompensationAudit Committee will be comprised of Donna R. Ecton, J. Mark Howell, Lynn JolliffeMichael T. Kestner and John P. Larson,Stephen E. Smith, with Ms. EctonMr. Kestner serving as the Chairman. Mr. Howell has been designated as an "audit committee financial expert" as that term is defined by the SEC.
Compensation Committee
Meetings Held in 2014: 112015: Eight
Primary Responsibilities: The Compensation Committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and approves the compensation of these officers based on such evaluations. The Compensation Committee also administers the issuance of equity and other awards under our equity plans.
Independence: All of the current and former members of the Compensation Committee are or were during their tenure on the committee, independent under the NYSE rules (including the enhanced independence requirements for Compensation Committee members).
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Nominating and Corporate Governance Committee
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Additional Committee Members: Peter R. Formanek, Mark E. Hill and Stephen E. Smith
Other Committee Members in 2014: Michael B. Goldberg, Church M. Moore and Jonathan P. Ward served on the Nominating and Corporate Governance Committee during a portion of 2014. Messrs. Goldberg, Moore and Ward completed their directorships as of the date of last year's annual meeting.
Committee Composition Following the Annual Meeting: Following the annual meeting, we expect that the Nominating and Corporate GovernanceCompensation Committee will be comprised of Todd F. Bourell, PeterDonna R. Formanek, Mark E. HillEcton, Lynn Jolliffe and Stephen E. Smith,John P. Larson, with Mr. HillMs. Ecton serving as the Chairman.
Nominating and Corporate Governance Committee
Meetings Held in 2014: 32015: Four
Primary Responsibilities: The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board of Directors regarding candidates for directorships and the size and composition of the Board of Directors. In addition, the Nominating and Corporate Governance Committee is responsible for overseeing our Corporate Governance Guidelines and reporting and making recommendations to the Board of Directors concerning governance matters.
Independence: All of the current and former members of the Nominating and Corporate Governance Committee are, or were during their tenure on the committee, independent under the NYSE rules.
Committee Composition Following the Annual Meeting: Following the annual meeting, we expect that the Nominating and Corporate Governance Committee will be comprised of Todd F. Bourell, Mark E. Hill, Lynn Jolliffe and Stephen E. Smith, with Mr. Hill serving as the Chairman.
Risk Committee
Meetings Held in 2015: One
Primary Responsibilities: The Risk Committee was established in July 2015. The Risk Committee assists the Board of Directors' OversightDirectors in its oversight of (i) the principal business, financial, technology and operational risks, and other material risks and exposures of the Company and (ii) the actions, activities and initiatives of the Company to mitigate such risks and exposures. The Risk Committee also provides oversight for matters specifically relating to cyber security and other risks related to information technology systems and procedures.
Independence: All of the current members of the Risk Committee are independent under the NYSE rules.
Committee Composition Following the Annual Meeting: Following the annual meeting, we expect that the Risk Committee will continue to be comprised of Mark E. Hill, J. Mark Howell, John P. Larson and Michael T. Kestner, with Mr. Howell serving as the Chairman.
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| BOARD OF DIRECTORS' RISK OVERSIGHT |
Our management is responsible for the management and assessment of risk at the Company, including communication of the most material risks to the Board of Directors and its committees. TheOversight of risks to the Company is carried out by the Board of Directors as a whole and by each of its various committees. In July 2015, the Board of Directors formed a new Risk Committee which provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to aanother committee of the Board of Directors. Even when the oversight of a specific area of risk has been delegated to aanother committee, the Board of DirectorsRisk Committee may maintain oversight over such risks through the receipt of reports from the committee chairpersons to the Risk Committee. The Board of Directors maintains oversight over such risks through the receipt of reports from the chairperson of the Risk Committee and from the other committees at each regularly scheduled Board of Directors meeting. The Board of DirectorsRisk Committee and other committee reviews occur principally through the receipt of regular reports from management to the Board of Directors on these areas of risk, and discussions with management regarding risk assessment and risk management.
At its regularly scheduled meetings, the Board of Directors generally receives a number of reports which include information relating to risks faced by the Company. The Company's Chief Financial Officer provides a report on the Company's results of operations, its liquidity position, including an analysis of prospective sources and uses of funds, and the implications to the Company's debt
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covenants and credit rating, if any. The Chief Executive Officer of each primary business unit provides an operational report, which includes information relating to strategic, operational and competitive risks. Finally, the Company's General Counsel provides a privileged report which provides information regarding the status of the Company's material litigation and related matters, if any, including environmental updates and the Company's continuing compliance with applicable laws and regulations. At each regularly scheduled Board of Directors meeting, the Board of Directors also receives reports from the Risk Committee chairperson as well as other committee chairpersons, which may include a discussion of risks initially overseen by the committees for discussion and input from the Board of Directors. As noted above, in addition to these regular reports, the Board of DirectorsRisk Committee receives reports on specific areas of risk from time to time, such as regulatory, cyclical or other risks that are not covered in the regularand reports given to the Board of Directors and described above.on these matters.
The Board of Directors' leadership structure, through its committees, also supports its role in risk oversight. The Audit Committee maintains initial oversight over risks related to the integrity of the Company's financial statements; internal controls over financial reporting and disclosure controls and procedures (including the performance of the Company's internal audit function); the performance of the independent registered public accounting firm; and oversees the Company's responses to ethics issues arising from the Company's whistleblower hotline. The Company's Compensation Committee maintains oversight over risks related to the Company's compensation practices. The Nominating and Corporate Governance Committee monitors potential risks relating to the effectiveness of the Board of Directors, notably director succession, composition of the Board of Directors and the principal policies that guide the Company's governance. The Risk Committee maintains oversight over risks generally and specifically with respect to cyber security and information technology systems and procedures.
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| CORPORATE GOVERNANCE DOCUMENTS |
The Board of Directors has adopted the following corporate governance documents:
| Document | Purpose/Application | ||||
|---|---|---|---|---|---|
Code of Business Conduct and Ethics | Applies to all of the Company's employees, officers and directors, including those officers responsible for financial reporting. | ||||
Code of Ethics for Principal Executive and Senior Financial Officers | Applies to the Company's principal executive officer, principal financial and accounting officer and such other persons who are designated by the Board of Directors. | ||||
Corporate Governance Guidelines | Contains general principles regarding the functions of the Board of Directors and its committees. | ||||
Committee Charters | Applies to the following Board committees, as applicable: Audit Committee, Compensation Committee, | ||||
| Lead Independent Director Charter | Sets forth a clear mandate and significant authority and responsibilities for the Lead Independent Director. |
We expect that any amendments to the codes of ethics, or any waivers of their requirements for executive officers and directors, will be disclosed on the Company's website. The foregoing documents are available atwww.karauctionservices.com under on the "Investor Relations" link onpage under the "Corporate Governance" pagelink and in print to any stockholder who requests them. Requests should be made to KAR Auction Services, Inc., Investor Relations, 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032. The information on our website is not part of this proxy statement and is not
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deemed incorporated by reference into this proxy statement or any other public filing made with the SEC.
| COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
During the fiscal year ended December 31, 2014,2015, Messrs. Formanek, LarsonHowell and MooreLarson and Mmes. Ecton and Jolliffe served as members of the Compensation Committee. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or our Compensation Committee. None of the individuals serving as members of the Compensation Committee during 20142015 are now or were previously an officer or employee of the Company.Company, other than Mr. Howell who served as the Vice President and Corporate Controller of ADESA, Inc. from August 1992 to July 1994. Our Board has affirmatively determined that Mr. Howell meets the standards of "independence" established by the NYSE.
| COMMUNICATIONS WITH THE BOARD OF DIRECTORS |
Any interested parties desiring to communicate with the Chairman of the Board of Directors or any of the independent directors regarding the Company may directly contact such directors by delivering such correspondence to the Company's General Counsel at KAR Auction Services, Inc., 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032.
The Audit Committee of the Board of Directors has established procedures for employees, stockholders and others to submit confidential and anonymous reports regarding accounting, internal accounting controls, auditing or any other matters.
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| EXECUTIVE SESSIONS |
The independent directors of the Company meet in executive session at every regularly scheduled Board of Directors meetings, if needed.meetings. The Company's Corporate Governance Guidelines state that the Chairman of the Board of Directors, if an independent director, or the Lead Independent Director shall preside at such executive sessions, or in such director's absence, another independent director designated by the Chairman of the Board of Directors or the Lead Independent Director, as applicable, shall preside at such executive sessions. Currently, Mr. Larson, our Lead Independent Director, presides at the executive sessions of our independent directors.
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| DIRECTOR COMPENSATION |
We use a combination of cash and stock-based incentive compensation to attract and retain independent, qualified candidates to serve on the Board of Directors. The Board of Directors makes all director compensation determinations after considering the recommendations of the Nominating and Corporate Governance Committee. For 2015, the Nominating and Corporate Governance Committee retained Semler Brossy as its independent compensation consultant.
In setting director compensation, we consider market comparison studies and other data obtained from Semler Brossy, the responsibilities of directors generally including committee chairs, the significant amount of time that directors expend in fulfilling their duties, as well asand the skill level we require of members of our Board of Directors. As discussed below, we revised our director compensation programDirectors who also serve as employees of the Company do not receive payment for 2014 in connection with the ongoing transition of our Board of Directors upon KAR LLC losing its director nomination rights pursuant to its divestiture of its holdings of our Company stock in late 2013.services as directors.
| CASH AND STOCK RETAINERS |
Cash. Members of the Board of Directors who are not our employees were entitled to receive an annual cash retainer of $75,000 during 2014. Such directors may elect to receive their annual cash retainer in common stock. In addition, the Chairperson of the Audit Committee received an additional cash retainer of $20,000, the Chairperson of the Compensation Committee received an additional cash retainer of $15,000 and the Chairperson of the Nominating and Corporate Governance Committee received an additional cash retainer of $10,000. In connection with the appointment of Mr. Larson as Lead Independent Director on December 31, 2014, the Board approved an annual cash retainerserved for the Lead Independent Directorentirety of $30,000. 2015 received:
| Components of Director Compensation Program For 2015 Service | Value of Cash Payment/Award | Form of Payment | ||
|---|---|---|---|---|
| | | | | |
| Annual Cash Retainer(1) | $75,000 | Cash; May elect to receive annual cash retainer in common stock | ||
| Annual Stock Retainer(2) | $100,000 | Restricted Stock | ||
| Lead Independent Director Retainer | $30,000 | Cash | ||
| Audit and Compensation Committee Chair Fee(3) | $20,000 | Cash | ||
| Nominating and Corporate Governance Committee Chair Fee | $10,000 | Cash | ||
| Risk Committee Chair Fee(4) | — | Cash |
Stock. In addition to theThe annual cash compensation, directors who are not employed by us received an annual stock retainer of $100,000 of our common stock in the form of restricted stock during 2014. has been increased to $85,000 for 2016.
All of our directors are not employed by us and who joined thereimbursed for reasonable expenses incurred in connection with attending Board of Directors meetings, committee meetings and Board education events.
For any director who started after the beginning of the year, became a Committee Chair after the beginning of the year or retired during the year, but not atrelevant compensation was prorated according to the annual meeting were eligible to receive a prorated restricted stock award.number of months during which he or she served in that position during that year.
| DIRECTORS DEFERRED COMPENSATION PLAN |
Our Board of Directors adopted the KAR Auction Services, Inc. Directors Deferred Compensation Plan (the "Director Deferred Compensation Plan") in December 2009. Pursuant to the terms of the Director Deferred
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Compensation Plan, each non-employee director who is not employed by us may elect to defer the receipt of his or her cash director fees into a pre-tax interest-bearing deferred compensation account, which account accrues interest as described in the Director Deferred Compensation Plan. Amounts under the Director Deferred Compensation Plan may also be invested in the same investment choices as are available under our 401(k) plan. Directors also may choose to receive all or a portion of their annual stock retainer in the form of a deferred share account. The plan provides that the amount of cash in a director's deferred cash account, plus a number of shares of common stock equal to the number of shares in the director's deferred share account, will be delivered to a
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director in installments over a specified period or within 60 days following the date of the director's departure from the Board of Directors, with cash being paid in lieu of any fractional shares.
| DIRECTOR STOCK OWNERSHIP AND HOLDING GUIDELINES |
The Company's non-employee directors are subject to the Company's director stock ownership and holding guidelines. The stock holding guideline requires each non-employee director to hold any shares of the Company's common stock granted after January 1, 2014 for at least four years, subject to certain exceptions approved by the CompensationNominating and Corporate Governance Committee. All shares granted on and after January 1, 2014 must be held for six months after service as a director has ended with the Company.
The stock ownership guideline,guidelines, which waswere adopted in 2015, requiresrequire each non-employee director to own a minimum of three times his or her annual cash retainer amount in shares of Company stock.
| DIRECTOR COMPENSATION PAID IN |
The following table provides information regarding the compensation paid to our non-employee directors.
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Total | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Ryan M. Birtwell(3) | $ | 47,404 | $ | 100,014 | $ | 147,418 | ||||
Brian T. Clingen(4) | $ | 75,000 | $ | 150,042 | $ | 225,042 | ||||
Donna R. Ecton | $ | 75,000 | $ | 150,042 | $ | 225,042 | ||||
Robert M. Finlayson(5) | $ | 42,019 | $ | 12,507 | $ | 54,526 | ||||
Peter R. Formanek(6) | $ | 84,015 | $ | 112,521 | $ | 196,536 | ||||
Mark E. Hill(7) | $ | 41,827 | $ | 100,014 | $ | 141,841 | ||||
J. Mark Howell(8) | | — | | — | | — | ||||
Lynn Jolliffe(9) | $ | 41,827 | $ | 100,014 | $ | 141,841 | ||||
Michael T. Kestner(10) | $ | 86,154 | $ | 150,042 | $ | 236,196 | ||||
John P. Larson(11) | $ | 41,827 | $ | 100,014 | $ | 141,841 | ||||
Stephen E. Smith | $ | 75,000 | $ | 150,042 | $ | 225,042 | ||||
Jonathan P. Ward(12) | $ | 33,173 | $ | 12,507 | $ | 45,680 | ||||
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Total | |||
|---|---|---|---|---|---|---|
| Ryan M. Birtwell(3) | $35,961 | — | $35,961 | |||
| Todd F. Bourell(4) | $43,269 | $100,031 | $143,300 | |||
| Donna R. Ecton(5) | $89,926 | $100,031 | $189,957 | |||
| Peter R. Formanek(6) | $78,062 | $100,031 | $178,093 | |||
| Mark E. Hill(7) | $80,769 | $100,031 | $180,800 | |||
| J. Mark Howell | $75,000 | $143,884 | $218,884 | |||
| Lynn Jolliffe | $75,000 | $100,031 | $175,031 | |||
| Michael T. Kestner | $95,000 | $100,031 | $195,031 | |||
| John P. Larson(8) | $105,000 | $100,031 | $205,031 | |||
| Stephen E. Smith | $75,000 | $100,031 | $175,031 |
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annual stock retainer in June 2014.2015. Pursuant to the Director Deferred Compensation Plan, (i) Messrs. Bourell, Hill, Howell, Kestner, Larson and Smith and Mmes. Ecton and Jolliffe each elected to receive 100% of his or her annual stock retainer in a deferred share account and (ii)account. Mr. Kestner electedHowell deferred a grant of 1,270 shares ($43,853) on January 2, 2015 which he received as a pro-rata grant as he was appointed to receive 50%the Board effective as of his annual stock retainer in stock and 50% in a deferred share account.December 31, 2014.
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Mr. Hallett and Tom O'Brien werewas not entitled to receive any fees or other compensation for serving as a member of our Board of Directors because they werehe was employed by the Company. In addition, Dave Ament, Church Moore and Michael Goldberg served as directors for part of 2014 but did not receive any compensation from the Company in connection with their directorships because they were employed by one of the Company's former equity sponsors and therefore are excluded from the table above.
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| OUTSTANDING DIRECTOR RESTRICTED STOCK AWARDS |
The following table sets forth information regarding the number of unvested shares of our common stock held by each non-employee director who was not employed by the Company as of December 31, 2014:2015:
Name | Unvested Shares of Common Stock | Unvested Shares of Common Stock | Deferred Phantom Shares and Dividend Equivalents(1) | |||||
|---|---|---|---|---|---|---|---|---|
Ryan M. Birtwell | | 1,584 | ||||||
Brian T. Clingen | — | |||||||
| Todd F. Bourell | 1,328 | 2,658 | ||||||
Donna R. Ecton | | 1,610 | (1) | 1,328 | 7,747 | |||
Robert M. Finlayson | — | |||||||
Peter R. Formanek | | 1,584 | 1,328 | — | ||||
Mark E. Hill | 1,610 | (1) | 1,328 | 5,978 | ||||
J. Mark Howell | | — | 1,328 | 3,957 | ||||
Lynn Jolliffe | 1,610 | (1) | 1,328 | 5,978 | ||||
Michael T. Kestner | | 1,600 | (1) | 1,328 | 6,041 | |||
John P. Larson | 1,610 | (1) | 1,328 | 5,978 | ||||
Stephen E. Smith | | 1,610 | (1) | 1,328 | 7,747 | |||
Jonathan P. Ward | — | |||||||
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| BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK |
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 13, 20152016 of: (1) each person or entity who owns of record or beneficially 5% or more of any class of KAR Auction Services'the Company's voting securities of which 141,800,443137,300,457 shares of common stock were outstanding as of April 13, 2015;2016; (2) each of our directors, director nominees and named executive officers; and (3) all of our directors, director nominees and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, each stockholder will have sole voting and investment power with respect to the shares indicated as beneficially owned, unless otherwise indicated in a footnote to the following table. The percentage calculations below are based on 141,800,443137,300,457 shares of common stock outstanding as of April 13, 20152016 rather than the percentages set forth in any stockholders' Schedule 13D and Schedule 13G filings. Unless otherwise indicated in a footnote, the business address of each person is our corporate address, c/o KAR Auction Services, Inc. 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032.
| | Shares Beneficially Owned | |||||||
|---|---|---|---|---|---|---|---|---|
Name of Beneficial Owner | Number of Shares(1) | Percent of Class(2) | ||||||
| 5% BENEFICIAL OWNERS | | | ||||||
FMR LLC(3) | 12,965,245 | 9.1 | % | |||||
The Vanguard Group(4) | | 8,422,691 | | 5.9 | % | |||
| NAMED EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES | ||||||||
Ryan M. Birtwell(5) | | 3,168 | | * | ||||
Todd F. Bourell(5) | — | — | ||||||
Donna R. Ecton(5) | | 5,015 | | * | ||||
Peter R. Formanek(5) | 34,656 | * | ||||||
Donald S. Gottwald(6) | | 180,000 | | * | ||||
James P. Hallett(5)(7) | 198,601 | * | ||||||
Mark E. Hill(5) | | 11,772 | | * | ||||
J. Mark Howell(5) | 1,280 | * | ||||||
Lynn Jolliffe(5) | | 3,248 | | * | ||||
Michael T. Kestner(5) | 8,405 | * | ||||||
John P. Larson(5) | | 3,272 | | * | ||||
Eric M. Loughmiller(8) | 37,201 | * | ||||||
Rebecca C. Polak(9) | | 185,469 | | * | ||||
Stephen E. Smith(5) | 5,015 | * | ||||||
Stéphane St-Hilaire(10) | | 141,844 | | * | ||||
| Executive officers, directors and director nominees as a group (23 persons)(11) | 1,760,617 | 1.2 | % | |||||
| | Shares Beneficially Owned | ||||||
|---|---|---|---|---|---|---|---|
| Name of Beneficial Owner | Number of Shares(1) | Percent of Class(2) | |||||
5% BENEFICIAL OWNERS | | | |||||
Wells Fargo & Company(3) | 8,986,848 | 6.5 | % | ||||
The Vanguard Group(4) | | 9,307,797 | | 6.8 | |||
NAMED EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES | |||||||
Todd F. Bourell | | 2,871 | | * | |||
Donna R. Ecton | 8,039 | * | |||||
Peter R. Formanek | | 38,984 | | * | |||
Donald S. Gottwald(5) | 166,039 | * | |||||
James P. Hallett(5) | | 251,601 | | * | |||
Mark E. Hill | 19,743 | * | |||||
J. Mark Howell | | 4,190 | | * | |||
Lynn Jolliffe | 6,242 | * | |||||
Michael T. Kestner | | 11,378 | | * | |||
John Kett(5) | 102,695 | * | |||||
John P. Larson | | 6,243 | | * | |||
Eric M. Loughmiller(5) | 63,457 | * | |||||
Stephen E. Smith | | 8,038 | | * | |||
Stéphane St-Hilaire(5) | 152,286 | * | |||||
Executive officers, directors and director nominees as a group 22 persons(6) | | 1,764,382 | | 1.3 | % | ||
| | | |
| SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires KAR Auction Services' directors and executive officers and persons who own more than 10% of the issued and outstanding shares of the Company's common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC and the NYSE. Based solely on a review of such reports and written representations from the directors and executive officers, the Company believes that all such filing requirements were met during 2014, except that a Form 3 for John Hammer was untimely filed on April 8, 2014, a Form 4 for ValueAct Holdings L.P. reporting three sale transactions was untimely filed on August 18, 2014, and a Form 4 for Peter Kelly reporting a grant of stock options, three option exercises and three subsequent sale transactions was untimely filed on January 30, 2015.
| | | |
RESTATED CERTIFICATE OF INCORPORATION: PROPOSAL NO. 2 |
| PROPOSAL |
The Board of Directors has approved an amendment and restatement of our Amended and Restated Certificate of Incorporation to provide that the Company's stockholders may remove any director from office, with or without cause, and other ministerial changes. The full text of the proposed Second Amended and Restated Certificate of Incorporation is included asAnnex I hereto and has been marked to show changes from the current Amended and Restated Certificate of Incorporation.
Removal of Directors With or Without Cause
Article Fifth, Section (d) of the Company's Amended and Restated Certificate of Incorporation currently provides that the Company's stockholders may remove directors from office only for cause. The Delaware General Corporation Law, as applicable to corporations without a classified Board of Directors, requires that stockholders be afforded the right to remove directors from office with or without cause. The proposed amendment to the Company's Amended and Restated Certificate of Incorporation is intended to conform the Company's Amended and Restated Certificate of Incorporation to the requirements of Delaware law.
Ministerial Changes
The Company's Amended and Restated Certificate of Incorporation contains a number of references to the Company's former private equity sponsors and a completed stock split that are no longer applicable to the Company. The Second Amended and Restated Certificate of Incorporation will delete these erroneous references and include the re-numbering and lettering of remaining provisions. We do not believe that any of these ministerial changes would materially affect the rights or preferences of our stockholders. We believe that these changes are advisable in order to simplify the Amended and Restated Certificate of Incorporation for our stockholders, directors, officers, employees, agents and advisors.
| | | 29 |
| RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: PROPOSAL NO. |
| PROPOSAL |
The Audit Committee has appointed KPMG LLP ("KPMG") to serve as KAR Auction Services'the Company's independent registered public accounting firm for its fiscal year ending December 31, 2015.2016. The Audit Committee and the Board of Directors seek to have the stockholders ratify the Audit Committee's appointment of KPMG, which has served as KAR Auction Services'the Company's independent registered public accounting firm since 2006. Although KAR Auction Servicesthe Company is not required to seek stockholder approval of this appointment, the Board of Directors believes it to be sound corporate governance to do so. If the appointment of KPMG is not ratified by the stockholders, the Audit Committee will consider the vote of the Company's stockholders and may appoint another independent registered public accounting firm or may decide to maintain its appointment of KPMG. Ratification of the appointment of our independent registered public accounting firm requires the affirmative vote of the majority of shares present in person or represented by proxy at the annual meeting and entitled to vote.
Representatives of KPMG will be present at the annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
| | | |
| REPORT OF THE AUDIT COMMITTEE |
The Audit Committee reviewsis composed of four independent directors, each of whom satisfies the Company'sindependence requirement of Rule 10A-3 under the Securities Exchange Act of 1934, as amended. The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. The Audit Committee consists of directors who have been determined byDirectors and serves as the primary communication link between the Board of Directors to beas the representative of our stockholders, the independent of the Company as prescribed by the NYSEauditors, KPMG LLP and other regulators. The Company'sour internal auditors. Our management has the primary responsibility for the financial statements and for the reporting process, including the establishmentsystems of internal control and maintenance offor assessing the systemeffectiveness of internal control over financial reporting. The Company's independent registered public accounting firm is responsible for auditing the consolidated financial statements prepared by management, expressing an opinion on the conformity of those consolidated audited financial statements with generally accepted accounting principles, and auditing the Company's internal control over financial reporting and expressing an opinion thereon. In this context, the Audit Committee has met and held discussions with management and KPMG, the Company's independent registered public accounting firm, regarding the fair and complete presentation of the Company's consolidated financial statements and the assessment of the Company's internal control over financial reporting.
The Audit Committee has discussed with KPMG matters required to be discussed by Auditing Standard No. 16, as issued by the Public Company Accounting Oversight Board (the "PCAOB"), and has reviewed and discussed KPMG's independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letter required by applicable requirements of the PCAOB regarding KPMG's communications with the Audit Committee concerning independence, and the Audit Committee has discussed KPMG's independence from the Company. The Audit Committee also has considered whether KPMG's provision of non-audit services to the Company is compatible with the auditor's independence. The Audit Committee has concluded that KPMG is independent from the Company and its management.
The Audit Committee meets with the Company's Chief Financial Officer, the Company's Vice President of Internal Audit and representatives of KPMG, in regular and separate, executive sessions, to discuss the audited consolidated audited financial statements, the evaluations of the Company's internal controls and the overall quality of the Company's financial reporting and compliance programs.
In fulfilling its responsibilities during the fiscal year, the Audit Committee reviewed with management the consolidated financial statements and related financial statement disclosures included in our Quarterly Reports on Form 10-Q and the audited consolidated financial statements and related financial statement disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Also, the Audit Committee reviewed with the independent auditors their judgments as to both the quality and the acceptability of our accounting policies. The Audit Committee's review with the independent auditors included a discussion of other matters required under Auditing Standards promulgated by the Public Company Accounting Oversight Board ("PCAOB"), including PCAOB Auditing Standard No. 16,Communications with Audit Committees. The Audit Committee received the written disclosures from the independent auditors required by the PCAOB Rule Nos. 3524 and 3526 regarding communications with the Audit Committee concerning independence and has discussed those disclosures with the independent auditors. The Audit Committee has also reviewed non-audit services performed by KPMG and considered whether KPMG's provision of non-audit services was compatible with maintaining its independence from the Company.
The Audit Committee discussed with our internal auditors and independent auditors the overall scope and plans for their respective audits and reviewed our plans for compliance with management certification requirements pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. The Audit Committee met with the internal auditors and independent auditors, with and without management present, to discuss the results of the auditors' examinations, their evaluations of our internal controls, including a review of the disclosure control process, and the overall quality of our financial reporting. Management represented to the Audit Committee that the Company's consolidated audited financial statements as of and for the fiscal year ended December 31, 2015 were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with management and the independent auditors. The Audit Committee, or the Chairman of the Audit Committee, also pre-approved all audit and non-audit services provided by the independent auditors during and relating to fiscal year 2015. In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors and the Board of Directors has approved, that the audited consolidated audited financial statements be included in the Company'sour Annual Report on Form 10-K for the fiscal year ended December 31, 2014, for filing2015.
The Audit Committee evaluates the performance of the independent auditors each year and determines whether to re-engage the current independent auditors or consider other audit firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent auditors, along with the SEC.independent auditor's capabilities, technical expertise, and knowledge of our operations and industry. In addition, the Audit Committee reviews with our Chief Financial Officer and our Vice President of Internal Audit, the overall audit scope and plans, the results of internal and external audit examinations, evaluations by management and the independent auditors of our internal control over financial reporting and the quality of our financial reporting and the ability of the independent auditors to remain independent. Based on these evaluations, the Audit Committee decided to engage KPMG LLP as our independent auditors for fiscal year 2016. Although the Audit Committee has the sole authority to appoint the independent auditors, the Audit
| | | 31 |
Committee has continued its long-standing practice of recommending that the Board ask our stockholders to ratify the appointment of the independent auditors at our annual meeting of stockholders.
The Audit Committee
Michael T. Kestner(Chairman)J. Mark HowellDonna R. Ecton
Lynn JolliffeJohn P. Larson
Stephen E. Smith
| |
| FEES PAID TO KPMG LLP |
The following table sets forth the aggregate fees charged to KAR Auction Services by KPMG for audit services rendered in connection with the audit of our consolidated financial statements and reports for 20142015 and 20132014 and for other services rendered during 20142015 and 20132014 to KAR Auction Services and its subsidiaries, as well as all out-of-pocket costs incurred in connection with these services:
Fee Category | 2014 | 2013 | 2015 | 2014 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees(1) | $ | 2,148,000 | $ | 2,160,000 | | $2,359,561 | | $2,148,000 | ||||||
Audit-Related Fees(2) | 32,500 | 237,000 | 33,000 | 32,500 | ||||||||||
Tax Fees(3) | | 96,035 | | — | | 248,615 | | 96,035 | ||||||
All Other Fees(4) | 70,471 | 51,014 | 160,432 | 70,471 | ||||||||||
| | | | | | | | | | | | | | | |
Total Fees | $ | 2,347,006 | $ | 2,448,014 | | $2,801,608 | | $2,347,006 | ||||||
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| | | | | | | | | | | | | | | |
| POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
KAR Auction Services' independent registered public accounting firm fee pre-approval policy provides for an annual process through which the Audit Committee evaluates the nature and scope of the audit prior to the commencement of the audit. The Audit Committee also evaluates audit-related, tax and other services that are proposed, along with the anticipated cost of such services. The Audit Committee reviews schedules of specific services to be provided. If other services are provided outside of this annual process, under the policy they may be (i) pre-approved by the Audit Committee at a regularly scheduled meeting; or (ii) pre-approved by the Chairman of the Audit Committee, acting between meetings and reporting back to the Audit Committee at the next scheduled meeting. All audit, audit-related, tax services and all other fees described above were approved by the Audit Committee or the Chairman of the Audit Committee before such services were rendered.
| | | |
COMPENSATION DISCUSSION AND ANALYSIS |
| OVERVIEW |
The following discussion and analysis of our compensation program for named executive officers should be read in conjunction with the tables and text elsewhere in this proxy statement that describe the compensation awarded and paid to the named executive officers.
Named Executive Officers
Our named executive officers for the last completed fiscal year were (i) our chief executive officer; (ii) our chief financial officer; and (iii) each of the three other most highly compensated executive officers who were serving as executive officers at the end of the last completed fiscal year. Our named executive officers are:
Jim Hallett, Chief Executive Officer and Chairman of the Board of KAR Auction Services;
Eric Loughmiller, Executive Vice President and Chief Financial Officer of KAR Auction Services;
Don Gottwald, Chief Operating Officer of KAR Auction Services;
Stéphane St-Hilaire, Chief Executive Officer and President of ADESA;
Becca Polak, Executive Vice President, General Counsel and Secretary of KAR Auction Services; and
Don GottwaldJohn Kett, Chief OperatingExecutive Officer and President of KAR Auction Services.IAA.
This CD&A is organized into the following six sections:
Executive Summary (page 40)34)
Compensation Philosophy and Objectives (page 42)38)
The Role of the Compensation Committee and the Executive Officers in Determining Executive Compensation (page 43)38)
Elements Used to Achieve Compensation Philosophy and Objectives (page 44)40)
Compensation-RelatedCompensation Policies and Other Information (page 56)49)
Results of Say on Pay Votes at 2014 Annual Meeting (page 58)51)
| | | |
| EXECUTIVE SUMMARY |
Business Highlights
For the year ended December 31, 2014,2015, KAR Auction Services again delivered solid growth in volume of total vehicles sold, revenues, adjusted EBITDA and Adjusted EBITDA.adjusted net income. Specific highlights for fiscal 20142015 included:
Net income increased 150% from $67.7 million ($0.48 per diluted share) to $169.3 million ($1.19 per diluted share).
| | | |
We increased
| | | 35 |
We maintain a compensation program structured to achieve a close connection between executive pay and company performance. We believe that this strong pay-for-performance orientation has served us well in recent years, particularly as we've moved forward following the sale by our former equity sponsors of all of their holdings of our common stock in late 2013.
WE DO:
5-year Pay Alignment Chart
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year | 2009 YE | 2010 | 2011 | 2012 | 2013 | 2014 | 2010 YE | 2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
CEO Pay ($000) | | $2,689 | $1,475 | $1,414 | $5,994 | $4,808 | | $1,475 | $1,414 | $5,994 | $4,808 | $4,824 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Indexed TSR | 100 | 100.07 | 97.9 | 148.26 | 223.83 | 271.05 | 100 | 97.83 | 148.15 | 223.66 | 270.86 | 297.96 | ||||||||||||
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| | | 36 |
WE DO NOT:
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| COMPENSATION PHILOSOPHY AND OBJECTIVES |
We design and administer our executive pay programs to help ensure the compensation of our named executive officers is (i) closely aligned with our performance on both a short-term and long-term basis; (ii) linked to specific, measurable results intended to create value for stockholders; and (iii) competitive in attracting and retaining key executive talent ininto the vehicle remarketing and auto finance industry. Each of the compensation programs that we have developed and implemented is intended to satisfy one or more of the following specific objectives:
| |
| THE ROLE OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE OFFICERS IN DETERMINING EXECUTIVE COMPENSATION |
Composition of the Compensation Committee. The Compensation Committee of our Board of Directors is comprised of Mmes. Ecton (Chairman) and Jolliffe and Mr.Messrs. Howell and Larson.
Role of the Compensation Committee. The Compensation Committee has primary responsibility for all compensation decisions relating to our named executive officers. The Compensation Committee reviews the aggregate level of our executive compensation, as well as the mix of elements used to compensate our named executive officers on an annual basis.
No Public Company Comparable Peers.Compensation Committee's Use of Market and Survey Data. In light of the unique mix of businesses that comprise KAR Auction Services and the lack of directly comparable public companies, the Compensation Committee has traditionally not adopted a specific peer group of companies for the purpose of formally benchmarking compensation. The Compensation Committee understands that most companies consider pay levels at comparably-sized, peer companies when setting named executive officer compensation levels. Knowing this practice, the Compensation Committee has attempted to develop a meaningful peer group for KAR in 2014,the Company, with help from its independent compensation consultant; however, the Committee has historically stopped short of a formal peer group, at this time, in part due to the unique combination of our three separate business segments.
| | | 38 |
In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of other comparably-sized companies. To date,Prior to 2015, the Compensation Committee hashad not set compensation levels by reference to competitive market data using any specific target percentiles within such data. Beginning in late 2015, the Compensation Committee began using a combination of (i) survey data (cuts from the 2015 Aon Hewitt and Mercer general industry and service industry surveys); and (ii) proxy compensation data of a "proxy comparator group" more formally in setting and adjusting base salary levels for 2016. In light of the lack of comparable companies for KAR's business, as noted above, companies in the proxy comparator group were selected based on (i) a focus on service-oriented industries; (ii) comparable revenue and market capitalization levels (KAR represents the 41st and 53rd percentiles, respectively, within the selected proxy comparator group on these measures); (iii) comparable growth, profitability and/or market valuation profiles; and (iv) the avoidance of over-representing any one industry. Where possible, the Compensation Committee included companies that are in related or similar industries to the Company. The proxy comparator group used in late 2015 consisted of the following 30 companies:
| Allison Transmission Holdings, Inc. | Kansas City Southern | Steelcase, Inc. | ||
| AOL, Inc. | Kirby Corp. | Stericycle, Inc. | ||
| Cintas Corp. | Landstar System, Inc. | Teradata Corp. | ||
| Comerica, Inc. | LKQ Corp. | Tetra Tech, Inc. | ||
| Copart, Inc. | MSC Industrial Direct Co., Inc. | Total System Services, Inc. | ||
| Equifax, Inc. | Old Dominion Freight Line, Inc. | Trimble Navigation Ltd. | ||
| GATX Corp. | Plexus Corp. | Vantiv, Inc. | ||
| Heartland Payment Systems, Inc. | Ritchie Bros. Auctioneers, Inc. | Waste Connections, Inc. | ||
| HNI Corp. | Solera Holdings, Inc. | Werner Enterprises, Inc. | ||
| Itron, Inc. | Springleaf Holdings, Inc. | Westinghouse Air Brake Technologies Corp. |
The Compensation Committee viewed the proxy comparator group and market data as an important guide, but not as the sole determinant in making its decisions regarding 2016 base salary levels. The Compensation Committee also considered experience and tenure, sustained performance and specific requirements of roles relative to market.
Role of the Independent Compensation Consultant. The Compensation Committee used ClearBridgeSemler Brossy as its independent compensation consultant in 2013 and early in 2014. Later in 2014, the Compensation Committee retained2015. During 2015, Semler Brossy as its independent compensation consultant. Clearbridge and Semler Brossy provided advice to the Compensation Committee. During 2014:
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The Compensation Committee has reviewed the independence of ClearBridge and Semler Brossy in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that (i) the work of ClearBridge for the Compensation Committee did not raise any conflict of interest; and (ii) the work of Semler Brossy for the Compensation Committee does not raise any conflict of interest. All work performed by ClearBridge and Semler Brossy is subject to review and approval of the Compensation Committee.
Role of the Executive Officers. Mr. Hallett regularly participates in meetings of the Compensation Committee at which compensation actions involving our named executive officers are discussed. Mr. Hallett assists the Compensation Committee by making recommendations regarding compensation actions relating to the executive officers other than himself. Mr. Hallett recuses himself and does not participate in any portion of any meeting of the Compensation Committee at which his compensation is discussed.
| | | 39 |
| ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY AND OBJECTIVES |
Elements of 20142015 Executive Compensation Program Design
The following table lists the elements of compensation for our 20142015 executive compensation program. The program uses a mix of fixed and variable compensation elements and provides alignment with both short- and long-term business goals through annual and long-term incentives. Our incentives are designed to drive overall corporate performance and business unit strategies that correlate to stockholder value and align with our strategic vision. In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of other companies.
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| | Element | Key Characteristics | Why We Pay This Element | How We Determine Amount | Decisions | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | ||
| Fixed | Base salary | Fixed compensation component payable in cash. Reviewed annually and adjusted when appropriate. | Reward the NEOs for their past performance and facilitate the attraction and retention of a skilled and experienced executive management team. | Individual performance, experience, job scope, tenure and | ||||||||
| | | | | | | | | | | | ||
Variable | Annual cash incentive awards | Variable compensation component payable in cash based on performance against annually established targets. | Motivate and reward the successful achievement of pre-determined financial objectives at the Company. | Individual performance, experience, job scope and review of competitive pay practices. Based on achievement of 2015 Adjusted EBITDA. |
| Strong performance | ||||||
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| ||||||||||||
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Performance restricted stock units (PRSUs) | PRSUs vest at the end of a three-year performance period. See | Motivate and reward executives for performance on key long-term measures. Align the interests of executives with long-term stockholder value and serve to retain executive talent. | Target awards based on individual's ability to impact future results, job scope, individual performance and Earned awards based on PRSU awards made up 75% of the value of the aggregate long-term incentives granted to the named executive officers in 2015. | The Compensation Committee granted PRSUs to all of the named executive officers in | ||||||||
| | | | | | | | | | | | ||
| Restricted stock units (RSUs) | RSUs vest ratably on each of the first three anniversaries of the grant date subject to the named executive officer's continued employment with the Company, provided that the Company achieves $100 million in adjusted net income in its 2015 fiscal year, as reported by the Company (which condition was satisfied). | Align the interests of executives with long-term stockholder value and serve to retain executive talent. | Awards based on individual's ability to impact future results, job scope, individual performance and review of competitive pay practices. RSU awards made up 25% of the value of the aggregate long-term incentives granted to the named executive officers in 2015. | The Compensation Committee granted RSUs to all of the named executive officers in 2015. See page 46. | ||||||||
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| | | |
Compensation Structure and Goal Setting
Our executive compensation program is designed to deliver compensation in accordance with corporate and business unit performance with a large percentage of compensation at risk through long-term equity awards and annual cash incentive awards. These awards are linked to actual performance, consistent with our belief that a significant amount of executive compensation should be in the form of equity and that a greater percentage of compensation should be tied to performance for executives who bear higher levels of responsibility for our performance. The mix of target direct compensation for 20142015 for our CEO and the average of our other named executives is shown in the charts below. Approximately 79%80% of our CEO's total compensation, and approximately 67%70% of the average total compensation of our other named executive officers, is at-risk, consisting of stock options and other performance-based incentives. As we move away from historical incentive programs developed in large part by our former equity sponsors, the Compensation Committee continues to refine the elements, mix of awards and performance goals in our incentive compensation program, while ensuring that a large portion of our named executive officers' compensation is performance-based.
| | | |
Other NEO Average Compensation
Base Salary
General. Annual salary levels for our named executive officers are based upon various factors, including the amount and relative percentage of total compensation that is derived from base salary when setting the compensation of our executive officers, individual performance, experience, job scope and tenure. In view of the wide variety of factors considered by the Compensation Committee in connection with determining the base salary of each of our named executive officers, the Compensation Committee has not attempted to rank or otherwise assign relative weights to the factors that it considers. A description of how these factors were applied in 20142015 is described below.
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Base Salaries for 2014. In late 2013 and the first quarter of 2014, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2014. After considering multiple factors, the Compensation Committee approved the following base salaries:
Name | Base Salary | Increase % | Effective Date | Why Was Increase Approved? | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Jim Hallett | $ | 900,000 | | 8 | % | January 1, 2014 | Increase based on experience, individual performance and tenure, confirmed by review of competitive market salaries for CEOs. | |||
| Eric Loughmiller | $ | 442,534 | 2 | % | February 7, 2014 | Increase based upon multiple factors, including, without limitation, the performance of the Company and the contribution of the NEO; consistent with the overall 2% merit increase pool established for the Company. | ||||
| Stéphane St-Hilaire | $ | 450,000 | | 44 | % | January 1, 2014 | Increase due to increased responsibilities, job scope and prominence and impact of position as a result of his promotion to CEO and President of ADESA. | |||
| Becca Polak | $ | 364,140 | 2 | % | January 1, 2014 | Increase based upon multiple factors, including, without limitation, the performance of the Company and the contribution of the NEO; consistent with the overall 2% merit increase pool established for the Company. | ||||
| Don Gottwald | $ | 432,973 | | 2 | % | January 1, 2014 | Increase based upon multiple factors, including, without limitation, the performance of the Company and the contribution of the NEO; consistent with the overall 2% merit increase pool established for the Company. | |||
| $ | 550,000 | | 28 | % | March 24, 2014 | Increase due to increased responsibilities as a result of his promotion to Chief Operating Officer of KAR. | ||||
Base Salaries for 2015. In late 2014 and the first quarter of 2015, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2015. After considering multiple factors, the Compensation Committee approved a base salary adjustment only for Mr. Loughmiller. The Compensation Committee did not approve base salary adjustments for Messrs. Hallett, St-Hilaire, Kett or Gottwald because the Compensation Committee determined that their base salaries were already set at competitive levels. The following base salaries were in effect for 2015:
Name | Base Salary | Increase % | Effective Date | Why Was Increase Approved? | ||||
|---|---|---|---|---|---|---|---|---|
Jim Hallett | $900,000 | 0% | January 1, 2014 | N/A. | ||||
Eric Loughmiller | $450,000 | 1.7% | January 1, 2015 | Increase based upon review of competitive pay practices. | ||||
Don Gottwald | $550,000 | 0% | January 1, 2014 | N/A. | ||||
Stéphane St-Hilaire | $450,000 | 0% | January 1, 2014 | N/A. | ||||
John Kett | $450,000 | 0% | January 1, 2014 | N/A. |
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Base Salaries for 2016. In late 2015, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2016. After considering multiple factors, including, without limitation, the performance of the Company, and the contribution of each named executive officer and review of competitive pay practices, the Compensation Committee approved the following base salaries effective January 1, 2015:2016:
Name | Base Salary | Increase % | Base Salary | Increase % | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Jim Hallett | $ | 900,000 | | 0 | % | $900,000 | 0% | ||||
Eric Loughmiller | $ | 450,000 | 2 | % | $450,000 | 0% | |||||
Don Gottwald | $566,500 | 3% | |||||||||
Stéphane St-Hilaire | $ | 450,000 | | 0 | % | $459,000 | 2% | ||||
Becca Polak | $ | 400,000 | 9 | % | |||||||
Don Gottwald | $ | 550,000 | | 0 | % | ||||||
John Kett | $463,500 | 3% | |||||||||
The Compensation Committee did not approve base salary adjustments for Messrs. Hallett St-Hilaire or GottwaldLoughmiller because the Compensation Committee determined that their base salaries were already set at competitive levels. In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of other companies.
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Annual Cash Incentive Programs
General. Generally, named executive officers with greater job responsibilities have a significant proportion of their annual cash compensation tied to Company performance through their annual incentive opportunity.
The KAR Auction Services, Inc. Annual Incentive Program. Under the KAR Auction Services, Inc. Annual Incentive Program (the "Annual Incentive Program"), which is part of the Omnibus Plan, the grant of cash-based awards to eligible participants is contingent upon the achievement of certain corporate performance goals as determined by the Compensation Committee.
Use of 20142015 Adjusted EBITDA and 2014 Adjusted Pre-Tax Net Income
In 2014,2015, the Compensation Committee used "2014"2015 Adjusted EBITDA" for KAR Auction Services, ADESA and AFC,IAA, depending upon the named executive officer, and "2014 Adjusted Pre-Tax Net Income" as the measuresmeasure of the Annual Incentive Program.
"2014 Adjusted EBITDA"
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Using these measures, the Compensation Committee establishes, on an annual basis, specific targets that determine the size of payouts under the incentive plan. In 2014,2015, the annual incentive opportunity for each named executive officer was as follows:
Name | KAR Auction Services | ADESA | ||||||
|---|---|---|---|---|---|---|---|---|
| Jim Hallett | Annual incentive award based 100% on performance of KAR Auction Services | |||||||
| Eric Loughmiller | Annual incentive award based 100% on performance of KAR Auction Services | — | — | |||||
| Don Gottwald | Annual incentive award based 100% on performance of KAR Auction Services | — | — | |||||
| Stéphane St-Hilaire | Annual incentive award based 50% on performance of KAR Auction Services | Annual incentive award based 50% on performance of ADESA | ||||||
Annual incentive award based 50% on performance of KAR Auction Services | Annual incentive award based 50% on performance of | |||||||
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The amount to be earned by our named executive officers under the Annual Incentive Program is determined by multiplying each officer's target opportunity by the Business Performance Factor as shown below:
Performance Targets for the Annual Incentive Program
The Compensation Committee analyzes financial measures and determines the level of performance required to receive threshold, target and superior annual incentive payouts. The Compensation Committee established the performance objectives in amounts which it believes would increase stockholder value and which it believed would be achievable given a sustained effort on the part of the named executive officers and which would require increasingly greater effort to achieve the target and superior objectives. The Compensation Committee may increase or decrease the performance targets and the potential payouts at each performance target if, in the discretion of the Compensation Committee, the circumstances warrant such an adjustment. In 2014,2015, the Compensation Committee did not increase or decrease the performance targets or the payouts of any 20142015 annual incentive program payout.
20142015 Performance Targets. The chart which follows provides the 20142015 Adjusted EBITDA performance targets established by the Compensation Committee for 20142015 as well as the actual level of performance achieved (dollars in millions):
| | Threshold | Target | Superior | Actual | Payout Percentage of Target Achieved | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
KAR Auction Services | $ | 522.78 | $ | 565.17 | $ | 621.69 | $ | 577.93 | | 111.3 | % | |||||
ADESA | $ | 236.51 | $ | 255.69 | $ | 281.26 | $ | 256.17 | 100.9 | % | ||||||
AFC | $ | 142.31 | $ | 153.85 | $ | 169.24 | $ | 149.50 | | 81.1 | % | |||||
| | Threshold | Target | Superior | Achieved Results | Percentage of Target Achieved | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
KAR Auction Services | $ | 592.9 | $ | 641.0 | $ | 673.0 | $ | 649.8 | | 101.4 | % | |||||
ADESA* | $ | 270.1 | $ | 292.0 | $ | 321.2 | $ | 316.2 | 108.3 | % | ||||||
IAA | $ | 245.1 | $ | 265.0 | $ | 291.5 | $ | 265.1 | | 100.0 | % | |||||
The chart which follows provides the 2014 Adjusted Pre-Tax Net Income*ADESA's performance targets established byand achieved results (in the Compensation Committeeabove chart) are used for 2014 as well asbonus purposes only and include certain technology expenses recorded in "holding company" expenses. ADESA's reported Adjusted
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EBITDA for the actual level of performance achieved (dollarsyear ended December 31, 2015 was $328.6 million and did not include such technology expenses recorded in millions):"holding company" expenses.
| | Threshold | Target | Superior | Actual | Payout Percentage of Target Achieved | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
KAR Auction Services | $ | 234.82 | $ | 253.86 | $ | 279.25 | $ | 289.77 | | 150 | % | |||||
20142015 Annual Incentive Opportunities. Under the Annual Incentive Program, threshold performance objectives must be met in order for any payout to occur. Payouts can range from 50% of target awards for performance at threshold up to a maximum of 150% of target awards for
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superior performance or no payout if performance is below threshold. The following table shows the annual incentive opportunities for our named executive officers for 2014:2015:
| | | Bonus Opportunity | Bonus Goal Weighting % | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | 2014 Adjusted Pre-Tax Net Income | |||||||||||||||||
| | | | | | 2014 Adjusted EBITDA | ||||||||||||||||||||
| | | Threshold % of Base Salary | Target % of Base Salary | Superior % of Base Salary | |||||||||||||||||||||
| Name | Base Salary | KAR Auction Services | ADESA | AFC | KAR Auction Services | ||||||||||||||||||||
Jim Hallett | $ | 900,000 | | 50 | | 100 | | 150 | | 70 | | | | | | 30 | |||||||||
Eric Loughmiller | $ | 442,534 | 37.5 | 75 | 112.5 | 70 | 30 | ||||||||||||||||||
Stéphane St-Hilaire(1) | $ | 450,000 | | 50 | | 100 | | 150 | | 35 | | 50 | | | | 15 | |||||||||
Becca Polak | $ | 364,140 | 37.5 | 75 | 112.5 | 70 | 30 | ||||||||||||||||||
Don Gottwald(2) | $ | 523,388 | | 50 | | 100 | | 150 | | 61.25 | | | | 12.5 | | 26.25 | |||||||||
| | | Bonus Opportunity | Bonus Goal Weighting % | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | 2015 Adjusted EBITDA | |||||||||
| | | Threshold % of Base Salary | Target % of Base Salary | Superior % of Base Salary | ||||||||||
| Name | Base Salary | KAR Auction Services | ADESA | IAA | ||||||||||
| Jim Hallett | $900,000 | 50 | 100 | 150 | 100 | | | |||||||
| Eric Loughmiller | $450,000 | 37.5 | 75 | 112.5 | 100 | |||||||||
| Don Gottwald | $550,000 | 50 | 100 | 150 | 100 | | | |||||||
| Stéphane St-Hilaire | $450,000 | 50 | 100 | 150 | 50 | 50 | ||||||||
| John Kett | $450,000 | 50 | 100 | 150 | 50 | | 50 | |||||||
Because KAR Auction Services, ADESA and AFCIAA each achieved at least the threshold level of performance, each of our named executive officers was eligible to receive an award under the Annual Incentive Program for 2014,2015, which are set forth in the Summary Compensation Table (page 61)53). Based on the Company's performance during 2014,2015, and the accompanying payout percentages for the different performance goals set forth above, our named executive officers earned the following percentages and corresponding payout amounts of their target annual incentive awards:
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2015 Annual Incentive Opportunities. The following table shows the annual incentive opportunities for our named executive officers for 2015:
| | | Bonus Opportunity | Bonus Goal Weighting % | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | Adjusted EBITDA | ||||||||||||||||||
| | | Threshold % of Base Salary | Target % of Base Salary | Superior % of Base Salary | |||||||||||||||||||
| Name | Base Salary | KAR Auction Services(1) | ADESA | Percentage of Target Annual Incentive Award Earned | 2015 Payout | ||||||||||||||||||
Jim Hallett | $ | 900,000 | | 50 | | 100 | | 150 | | 100 | | | 113.7% | $1,023,613 | |||||||||
Eric Loughmiller | $ | 450,000 | 37.5 | 75 | 112.5 | 100 | 113.7% | $383,855 | |||||||||||||||
Stéphane St-Hilaire | $ | 450,000 | | 50 | | 100 | | 150 | | 50 | | 50 | |||||||||||
Becca Polak | $ | 400,000 | 37.5 | 75 | 112.5 | 100 | |||||||||||||||||
Don Gottwald | $ | 550,000 | | 50 | | 100 | | 150 | | 100 | | | 113.7% | $625,541 | |||||||||
| Stéphane St-Hilaire(1) | 122.9% | $553,145 | |||||||||||||||||||||
| John Kett | 106.9% | $481,030 | |||||||||||||||||||||
Long-Term Incentive Opportunities
The Company provides long-term incentive compensation opportunities in the form of performance-based restricted stock units ("PRSUs"), service-based and restricted stock units, and previously had provided performance-based stock options and service-based stock options, each as described below.
20142015 Long-Term Incentive Awards. OnAs previously disclosed, on February 27, 2014,20, 2015, the Compensation Committee approved the grant ofgranted PRSUs and restricted stock optionsunits ("RSUs") under its long-term incentive program to certain of the Company's named executive officers, as discloseddescribed in the table below. The Company did not grant any stock options to its named executive officers in 2015. Awards were based on the individual's ability to impact future results, job scope, individual performance and a review of competitive pay practices. Mr. Loughmiller's 2015 award was enhanced for retentive purposes due to the fact that Mr. Loughmiller did not have any equity grants that carried forward following the sale by our former equity sponsors of all of their holdings of our common
Name | Target PRSUs (Total Stockholder Return Goal) | Value of Target Shares at Grant | Target PRSUs (Cumulative Adjusted Net Income Per Share Goal) | Value of Target Shares at Grant | Stock Options | Value of Options at Grant | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jim Hallett | 21,916 | $800,811 | 21,916 | $676,985 | 194,404 | $1,283,066 | |||||||
Eric Loughmiller | 10,958 | $400,405 | 10,958 | $338,493 | 97,204 | $641,546 | |||||||
Stéphane St-Hilaire | 4,384 | $160,191 | 4,383 | $135,391 | 38,884 | $256,634 | |||||||
Becca Polak | 3,945 | $144,150 | 3,945 | $121,861 | 34,996 | $230,974 | |||||||
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stock in late 2013. The aggregate target award value for each named executive officer was allocated such that 75% of the value was in the form of PRSUs and 25% of the value was in the form of RSUs.
Name | Target PRSUs (Cumulative Adjusted Net Income Per Share Goal) | Value of Target Shares at Grant | RSUs | Value of RSUs at Grant | ||||
|---|---|---|---|---|---|---|---|---|
| Jim Hallett | 57,879 | $2,142,681 | 19,293 | $714,227 | ||||
| Eric Loughmiller | 26,796 | $991,988 | 8,932 | $330,663 | ||||
| Don Gottwald | 14,738 | $545,601 | 4,913 | $181,879 | ||||
| Stéphane St-Hilaire | 9,647 | $357,132 | 3,216 | $119,056 | ||||
| John Kett | 9,647 | $357,132 | 3,216 | $119,056 |
20142015 Performance-Based RSU Awards
Fifty percent of the PRSUs will vest on the third anniversary of the grant date if and to the extent that the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds certain levels over the three-year period beginning on the grant date. A summary of the relative total stockholder return levels and corresponding payouts is provided in the following table:
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The remaining 50% of the PRSUs will vest if and to the extent that the Company's "Cumulative Adjusted Net Income Per Share" exceeds certain levels over the three-year period beginning on January 1, 2014.2015. "Cumulative Adjusted Net Income Per Share" means the sum of the Company's Adjusted Net Income Per Share for the three fiscal years in the Measurement Period. "Adjustedmeasurement period beginning on January 1, 2015 and ending on December 31, 2017.
"Adjusted Net Income Per Share" for a fiscal year is calculated by dividing Adjusted Net Income by the weighted average diluted common shares outstanding per year. "Adjusted Net Income" for a fiscal year is equal to the Company's net income as reported in the Form 10-K filed by the Company with respect to such fiscal year, recalculated utilizing the effective tax rate that was used to determine the cumulative adjusted net income per share target approved by the Compensation Committee, and adjusted to (i) exclude gains/losses from certain non-recurringnonrecurring and unbudgeted capital transactions, including debt prepayment, debt refinancing and similar items; (ii) exclude depreciation and amortization expenses resulting from the revaluation of certain assets at the time of the 2007 merger consistent with the Company's calculation of its reported adjusted net income; (iii) exclude certain expenses incurred in connection with stock-based compensation related to the 2007 merger consistent with the Company's calculation of its reported adjusted net income; (iv) exclude acquisition contingent consideration; (v) exclude the impact of significant acts of God or other events outside of the Company's control that may affect the overall economic environment; and (vi) exclude significant asset impairments.
With respect to all PRSUs, theThe amount of the target PRSUs actually earned and paid (on a 1-for-1 basis) in shares of common stock in a lump sum following the performance period will be: 0% for below threshold performance, 50% for threshold performance, 100% for target performance and up to 200% for achieving the maximum performance level. Linear interpolation will be used to calculate the percentage of target PRSUs earned and paid (on a 1-for-1 basis) if performance falls between the threshold and maximum levels.
2014 Stock Option2015 Time-Based RSU Awards
The RSUs will vest and convert into shares of common stock of the Company on a 1-for-1 basis on each of the first three anniversaries of the grant date, subject to the named executive officer's continued employment with the Company through each such anniversary, provided that the Company has achieved $100 million in adjusted net income in its 2015 fiscal year (as reported in the Form 10-K filed by the Company with respect to such fiscal year, and which condition was satisfied).
Prior Years' Awards.
2014 Stock Option and Performance-Based RSU Awards
As previously disclosed, on February 27, 2014, the Compensation Committee approved the grant of PRSUs and stock options to certain of the Company's named executive officers which remain outstanding, the amounts of which are disclosed in the "Outstanding Equity Awards" table below to the extent they remain outstanding.
The stock options have an exercise price of $30.89 per share and will vest in equal 25% increments on the first four anniversaries of the grant date, subject to the executive's continued employment with the Company through each such dates.anniversary.
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2013 Performance-Based RSU Awards. As previously disclosed, on December 13, 2013, the Compensation Committee approved the grant of PRSUs to certainFifty percent of the Company's named executive officers which remain outstanding, as disclosed in the table below.
Name | Target PRSUs | Value of Target Shares at Grant | |||
|---|---|---|---|---|---|
Jim Hallett | 134,409 | $4,407,271 | |||
Eric Loughmiller | 67,205 | $2,203,652 | |||
Becca Polak | 21,506 | $705,182 |
The PRSUs vest on the third anniversary of the grant date if and to the extent that the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds certain levels (identified below) over the three-year period beginning on the grant date.
Total Stockholder Return Percentile Rank vs. S&P 500 During the Measurement Period | Number of PRSUs Vesting | |
|---|---|---|
Below Threshold: | ||
Below 40th percentile | 0% of Target | |
Threshold: | ||
40th percentile | 50% of Target | |
Target: | ||
65th percentile | 100% of Target | |
Maximum: | ||
Greater than or equal to 85th percentile | 200% of Target |
The remaining 50% of the PRSUs vest if and to the extent that the Company's Cumulative Adjusted Net Income Per Share (as described above with respect to the 2015 PRSUs) exceeds certain levels over the three-year period beginning on January 1, 2014 and ending on December 31, 2016.
New Long-Term Incentive Design in 2015.2013 Performance-Based RSU Awards On February 10, 2015,
As previously disclosed, on December 13, 2013, the Compensation Committee approved the 2015 long-term incentive awards forgrant of PRSUs to certain of the Company's named executive officers which, were granted on February 20, 2015, as applicable, are disclosed in the table below.
Name | Target PRSUs (Cumulative Adjusted Net Income Per Share Goal) | Value of Target Shares at Grant | RSUs | Value of Shares at Grant | |||||
|---|---|---|---|---|---|---|---|---|---|
Jim Hallett | 57,879 | $2,142,681 | 19,293 | $714,227 | |||||
Eric Loughmiller | 26,796 | $991,988 | 8,932 | $330,663 | |||||
Stéphane St-Hilaire | 9,647 | $357,132 | 3,216 | $119,056 | |||||
Becca Polak | 8,575 | $317,447 | 2,859 | $105,840 | |||||
Don Gottwald | 14,738 | $545,601 | 4,913 | $181,879 |
The aggregate target award value for each named executive officer is allocated such that 75% of the value is in the form of PRSUs and 25% of the value is in the form of time-vested restricted stock units ("RSUs"). The PRSUs may be earned (from 0% to 200% of the target award value) basedvest on the Company's cumulative adjusted net income per share performance during the three-year period ending December 31, 2017 and are on substantially the same terms utilized by the Company for a portion of its PRSUs awards in 2014. The RSUs vest and convert into shares of common stock of the Company on a 1-for-1 basis on each of the first three anniversariesthird anniversary of the grant date duringif and to the named executive officer's continued employmentextent that the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds the levels described in the table above with respect to the Company.2014 PRSUs (earned based on total stockholder return) over the three-year period beginning on the grant date.
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Legacy Long-Term Incentive Awards.Awards
Certain service options and performance-based exit options were granted to our named executive officers under the KAR Auction Services, Inc. Stock Incentive Plan ("Stock Incentive Plan"), which was in effect prior to our initial public offering, and later under the Omnibus Plan, which was initially adopted on December 10, 2009.
Grants under the Stock Incentive Plan and the March 1, 2010 grant under the Omnibus Plan were structured as follows:
Together, these awards aligned the interests of our named executive officers and other employees with the interests of our stockholders, who benefited from both the retention of a skilled management team and an increase in the value of the Company.
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Performance-Based Option Vesting
The performance-based exit options vested and became exercisable in four tranches contingent upon the closing price of the shares of common stock of the Company exceeding the threshold levels of $20.00, $25.00, $30.00 or $35.00 for 20 consecutive trading days. The exit options included in the first tranche (the exit options associated with the $20.00 threshold level) became fully vested in March 2013, the exit options included in the second tranche (the exit options associated with the $25.00 threshold level) became fully vested in August 2013, the exit options included in the third tranche (the exit options associated with the $30.00 threshold level) became fully vested in March 2014 and the exit options included in the fourth tranche (the exit options associated with the $35.00 threshold level) became fully vested in March 2015, upon achieving the applicable vesting criteria.
Plans under which Long-Term Incentive Awards are Granted. The Company currently grants long-term incentive awards under the Omnibus Plan and formerly granted awards under the Stock Incentive Plan.
Omnibus Plan
Our Board of Directors initially adopted the Omnibus Plan on December 10, 2009, as amended. Under the Omnibus Plan, participants are eligible to receive options, restricted stock, restricted stock units, SARs, other stock-based awards or cash-based awards as determined by the Compensation Committee.
Stock Incentive Plan
The Stock Incentive Plan was in effect prior to our initial public offering and was subsequently frozen as of December 10, 2009. No further awards have been issued under this plan.
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Retirement, Health and Welfare Benefits
We offer a variety of health and welfare and retirement programs to all eligible employees, including our named executive officers. As with all Company employees, our named executive officers are eligible to receive 401(k) employer matching contributions equal to 100% of the first 4% of compensation contributed by the named executive officer or, in the case of Mr. St-Hilaire (prior to his move in 2015 onto our U.S. payroll), deferred profit sharing employer matching contributions of up to $2,500 (employer matches 100% of first $1,500 contributed by the named executive officer and 50% of the next $2,000 contributed by the named executive officer, subject to a cap equal to 6% of compensation) under the Group Registered Retirement Savings Plan ("GRRSP"). The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, dental, vision, pharmacy, life insurance, disability and accidental death and disability. We also provide travel insurance to all employees who travel for business purposes.
Perquisites
In general, the Compensation Committee believes that the provision of a certain level of perquisites and other personal benefits to the named executive officers is reasonable and consistent with the objective of facilitating and allowing us to attract and retain highly qualified executive officers. The perquisites which are currently available to certain of our named executive officers include an automobile allowance or use of a Company-owned automobile, an allowance for executive physicals and Company-paid group term life insurance premiums. Please see footnote 4 to the Summary Compensation Table for more information regarding perquisites.
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| COMPENSATION POLICIES AND OTHER INFORMATION |
Employment and Severance Agreements
The Compensation Committee recognizes that, from time to time, it is appropriate to enter into agreements with our executive officers to ensure that we continue to retain their services and to promote stability and continuity within the Company. All of our named executive officers have an employment agreement with KAR Auction Services or one of its subsidiaries. A description of these agreements can be found in the section titled "Employment"Potential Payments Upon Termination or Change in Control—Employment Agreements with Named Executive Officers."
Tax and Accounting Considerations
Employment Agreements. Section 280G of the Internal Revenue Code ("Section 280G") and related provisions impose substantial excise taxes under Section 4999 of the Code on so-called "excess parachute payments" payable to certain named executive officers upon a change in control and results in the loss of the compensation deduction for such payments by the Company.
Mr. Hallett's employment agreement, which became effective as of February 27, 2012, provides for a potential "gross-up payment" in the event that such excise taxes result from any excess parachute payments. Mr. Hallett's employment agreement provides that in the event that any payment or benefit under such agreement in connection with Mr. Hallett's employment or termination of employment is or becomes subject to an excise tax under Code Section 4999, then KAR Auction Servicesthe Company will make a cash payment to Mr. Hallett, which, after the imposition of all income, employment, excise and other taxes thereon as well as any penalty and interest assessments associated therewith, will be sufficient to place Mr. Hallett in the same after-tax position as he would
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have been in had such excise tax not been applied. However, in the event that a reduction of the total payments to Mr. Hallett would avoid the application of the excise tax, then the total payments will be reduced to the extent necessary to avoid the excise tax, but in no event by more than 10% of the original amount of the total payments.
None of the employment agreements entered into with Messrs. Loughmiller, Gottwald, and St-Hilaire and Ms. PolakKett contain excise tax gross-up provisions.
Omnibus Plan. Certain awards under the Omnibus Plan are designed so that they may comply with the performance-based compensation exception to the $1,000,000 per person annual deductibility limit under Section 162(m) applicable to Covered Employees. Though tax deductibility is one of many factors considered by the Compensation Committee when determining executive compensation, the Compensation Committee retains the discretion to award compensation that exceeds or does not qualify for the Section 162(m) deductibility limit. For example, in seeking to tie executive pay to company performance in a meaningful way, the Compensation Committee may make decisions in designing and approving pay programs that are not driven by tax consequences to the Company.
Accounting for Stock-Based Compensation. We account for stock-based compensation in accordance with the requirements of ASC 718.
Clawback Policy for Financial Restatements. In 2014, the Company adopted aThe Company's clawback policy providingprovides for the recovery of incentive compensation in the event the Company is required to prepare an accounting restatement due to any current or former executive officer's intentional misconduct. In such an event, the executive officer would be required to repay to the Company the excess amount of incentive compensation received under the inaccurate financial statement. The Company intends to revise this policy as needed to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act when such requirements become effective.
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Insider Trading Policy
Our insider trading policy expressly prohibits:
We also prohibit officers, directors and employees from:
Our executives and directors are permitted to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934 so that they can prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates.
Anti-Hedging Policy
In addition to the Company's existing anti-pledging of Company stock policy, the Company adopted a formal anti-hedging of Company stock policy in 2014. This policy prohibits our officers and
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directors from engaging in certain forms of hedging or monetization transactions with respect to the Company's stock, such as prepaid variable forward contracts, equity swaps, collars and exchange funds.
Stock Ownership and Stock Holding Guidelines
In 2015, we adopted the following stock ownership guidelines which are applicable to our named executive officers.
Title | Stock Ownership Guideline | |||||
|---|---|---|---|---|---|---|
| CEO | 5 times annual base salary | |||||
| Other Named Executive Officers | 3 times annual base salary |
The named executive officers must hold 100% of net shares of Company stock received under awards granted on or after January 1, 2015 until the applicable ownership guideline is met. In addition, our named executive officers are required to hold 100% of net shares of Company stock received under awards granted on or after January 1, 2015 for at least 12 months after vesting, regardless of whether the stock ownership guideline has been met.
The Company's non-employee directors are subject to the Company's director stock ownership and holding guidelines. The stock holding guideline requires each non-employee director to hold any shares of the Company's common stock granted after January 1, 2014 for at least four years, subject to certain exceptions approved by the Compensation Committee. The stock ownership guideline, which was adopted in 2015, requires each non-employee director to own a minimum of three times his or her annual cash retainer amount in shares of Company stock.
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| RESULTS OF SAY ON PAY VOTES AT 2014 ANNUAL MEETING |
At the Company's 2014 annual meeting of stockholders, the Company held a non-binding stockholder vote on executive compensation (commonly referred to as "Say on Pay"). At the meeting, excluding broker non-votes, over 95% of the votes on the matter were cast to approve the Company's executive compensation programs, less than 4% of the votes were cast against, and less than 1% abstained from voting.
The Compensation Committee has considered the results of the vote, including the appropriateness of the compensation philosophy and objectives, the role of the Compensation Committee and executive officers in setting compensation, the elements used to achieve the compensation philosophy and objectives and the levels of compensation provided to the named executive officers. Following its review, the Compensation Committee decided to retain the Company's general approach to executive compensation in 2014 and 2015, in part due to the significant majority of stockholders that voted to approve the Company's executive compensation programs at the 2014 annual meeting of stockholders.
Previously, at the Company's 2011 annual meeting of stockholders, the Company held a non-binding stockholder vote at the meeting on whether to hold a Say on Pay vote every one, two or three years. Approximately 12% of the votes on the matter were cast in favor of holding a vote every year, less than one-tenth of 1% were cast in favor of holding a vote every two years, approximately 86% were cast in favor of holding a vote every three years and approximately 2% abstained or constituted a broker non-vote. In line with the results of the vote, the Company will present a Say on
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Pay vote every three years, the next of which will occur at the Company's 2017 annual meeting of stockholders.
| COMPENSATION COMMITTEE REPORT |
The Compensation Committee, which was chaired by Church M. Moore from December 2009 to June 2014, Peter R. Formanek from June 2014 to March 2015 and by Donna R. Ecton from March 2015 to present, has reviewed the Compensation Discussion and Analysis for executive compensation for 20142015 and discussed that analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. This report is submitted by Donna R. Ecton, J. Mark Howell, Lynn Jolliffe and John P. Larson, being all current members of the Compensation Committee, and Peter R. Formanek, who was the Chairman of the Compensation Committee for a portion of 2014 as noted above.2015.
Compensation Committee
Donna R. Ecton(Chairman)
Peter R. Formanek
J. Mark Howell
Lynn Jolliffe
John P. Larson
| | | |
| ANALYSIS OF RISK IN THE COMPANY'S COMPENSATION STRUCTURE |
The Compensation Committee considers the potential risks in our business when designing and administering the Company's pay program, and the Compensation Committee believes its balanced approach to performance measurement and pay delivery works to avoid misaligned incentives for individuals to undertake excessive or inappropriate risk. Further, program administration is subject to considerable internal controls, and when determining the principal outcomes—performance assessments and pay decisions—the Compensation Committee relies on principles of sound governance and good business judgment. As part of its responsibilities to annually review all incentive compensation and equity-based plans, and evaluate whether the compensation arrangements of the Company's employees incentivize unnecessary and excessive risk-taking, the Compensation Committee evaluated the risk profile of all of the Company's compensation policies and practices for 2014.2015.
In its evaluation, the Compensation Committee reviewed the Company's employee compensation structures and noted numerous design elements that manage and mitigate risk without diminishing the incentive nature of the compensation. There is a balanced mix between cash and equity and annual and longer-term incentives. In addition, annual incentive awards and long-term incentive awards granted to executives are tied to corporate performance goals, including Adjusted EBITDA, Pre-Tax Net Income, TSR and Cumulative Adjusted Net Income Per Share. These metrics encourage performance that supports the business as a whole. The executive annual incentive awards include a maximum payout opportunity equal to 150% of target. Our executives are also expected to meet share ownership guidelines in order to align the executives' interests with those of our stockholders. Also, the Company's clawback policy permits the Company to recover incentive compensation paid to an executive officer if the compensation resulted from any financial result or metric impacted by the executive officer's misconduct or fraud. This policy helps to discourage inappropriate risks, as executives will be held accountable for misconduct which is harmful to the Company's financial and reputational health.
The Compensation Committee also reviewed the Company's compensation programs for certain design features that may have the potential to encourage excessive risk-taking, including: over-weighting towards annual incentives, highly leveraged payout curves, unreasonable thresholds and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds. The Compensation Committee concluded that the Company's compensation programs (i) do not include such elementselements; or (ii) have implemented features, steps and controls that are designed to limit risks of our compensation arrangements. In light of these analyses, the Compensation Committee concluded that the Company has a balanced pay and performance program that does not encourage excessive risk-taking that is reasonably likely to have a material adverse effect on the Company.
| | | |
| SUMMARY COMPENSATION TABLE FOR |
The table below contains information concerning the compensation of our (i) chief executive officer; (ii) chief financial officer; and (iii) each of the three other most highly compensated executive officers who were serving as executive officers as of December 31, 2014.2015.
| Name and Principal Position | Year | Salary | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | Year | Salary | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jim Hallett, | | 2014 | $900,000 | $1,477,796 | $1,283,066 | $1,106,118 | $41,340 | $4,808,320 | 2015 | $900,000 | $2,856,908 | — | $1,023,613 | $43,420 | $4,823,941 | ||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
CEO and Chairman | 2013 | $832,320 | $4,407,271 | — | $711,164 | $43,399 | $5,994,154 | 2014 | $900,000 | $1,477,796 | $1,283,066 | $1,106,118 | $41,340 | $4,808,320 | |||||||||||||||||
| | 2012 | $816,000 | — | — | $559,025 | $38,870 | $1,413,895 | | | | | | | | | | | | | | | | ||||||||
| 2013 | $832,320 | $4,407,271 | — | $711,164 | $43,399 | $5,994,154 | ||||||||||||||||||||||||
Eric Loughmiller, | 2014 | $442,534 | $738,898 | $641,546 | $407,913 | $32,026 | $2,262,917 | 2015 | $450,000 | $1,322,651 | — | $383,855 | $37,456 | $2,193,962 | |||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
EVP and CFO | | 2013 | $433,857 | $2,203,652 | — | $278,027 | $12,270 | $2,927,806 | 2014 | $442,534 | $738,898 | $641,546 | $407,913 | $32,026 | $2,262,917 | ||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
| 2012 | $425,350 | — | — | $218,549 | $12,565 | $656,464 | 2013 | $433,857 | $2,203,652 | — | $278,027 | $12,270 | $2,927,806 | ||||||||||||||||||
Don Gottwald, | 2015 | $550,000 | $727,480 | — | $625,541 | $31,385 | $1,934,406 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
Chief Operating | 2014 | $523,388 | — | — | $617,391 | $29,750 | $1,170,529 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
Officer | 2013 | $424,483 | — | — | $430,638 | $29,358 | $884,479 | ||||||||||||||||||||||||
Stéphane St-Hilaire,(5) | | 2014 | $434,363 | $295,582 | $256,634 | $456,113 | $93,051 | $1,535,743 | 2015 | $447,937 | $476,188 | — | $553,145 | $80,059 | $1,557,323 | ||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
CEO and President | 2014 | $434,363 | $295,582 | $256,634 | $456,113 | $93,051 | $1,535,743 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
of ADESA | | ||||||||||||||||||||||||||||||
Becca Polak, | 2014 | $364,140 | $266,011 | $230,974 | $335,652 | $25,853 | $1,222,630 | ||||||||||||||||||||||||
EVP, General Counsel | | 2013 | $357,000 | $705,182 | — | $228,775 | $25,634 | $1,316,591 | |||||||||||||||||||||||
and Secretary | 2012 | $347,195 | — | — | $179,833 | $25,412 | $552,440 | ||||||||||||||||||||||||
Don Gottwald,(6) | | 2014 | $523,388 | — | — | $617,391 | $29,750 | $1,170,529 | |||||||||||||||||||||||
Chief Operating | 2013 | $424,483 | — | — | $430,638 | $29,358 | $884,479 | ||||||||||||||||||||||||
Officer | | 2012 | $416,160 | — | — | $361,435 | $25,069 | $802,664 | |||||||||||||||||||||||
John Kett,(6) | 2015 | $450,000 | $476,188 | — | $481,030 | $33,620 | $1,440,838 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
CEO and President | |||||||||||||||||||||||||||||||
of IAA | |||||||||||||||||||||||||||||||
| | | |
Compensation information for 2013 and 2012 is not provided for Mr. St-Hilaire because he was not a named executive officer in those years. Mr. St-Hilaire's amounts other than annual incentive awards, equity awards and certain components of "all other compensation" are denominated in US dollars and paid in Canadian dollars. Using an exchange rate of (i) .9401 as of January 6, 2014, Mr. St-Hilaire's $450,000 annual base salary was converted to $478,647 CDN, which resulted in $434,363 in base salary actually being received by Mr. St-Hilaire in 2014 using a weighted average exchange rate with respect to all base salary payment dates of .9075, (ii) .8032 as of February 13, 2015, Mr. St-Hilaire's $567,870 CDN annual incentive award was converted to $456,113 and (iii) .8943, which was the weighted average exchange rate with respect to the portion of "all other compensation" payments to Mr. St-Hilaire paid in Canadian dollars during 2014, Mr. St-Hilaire's $44,083 CDN received as "all other compensation" is the equivalent of $39,422.
that year.
| | | |
| GRANTS OF PLAN-BASED AWARDS FOR |
The following table summarizes the payouts which our named executive officers could have received upon the achievement of certain performance objectives under the Annual Incentive Program.Program and the grants of PRSUs and RSUs made under the Omnibus Plan in 2015. We did not grant any option awards in 2015.
| | | Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards(2) | All Other Option Awards | | | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name (a) | Grant Date (b) | Threshold ($)(c) | Target ($)(d) | Maximum ($)(e) | Threshold (#)(f) | Target (#)(g) | Maximum (#)(h) | Number of Securities Underlying Options (#)(3)(j) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value ($)(4)(l) | |||||||||||||||||||
Jim Hallett | — | | 450,000 | | 900,000 | | 1,350,000 | | | | | | | | | | | | |||||||||||
| 2/27/2014 | 194,404 | $30.89 | 1,283,066 | ||||||||||||||||||||||||||
| 2/27/2014 | | | | | | | | 10,958 | | 21,916 | | 43,832 | | | | | 800,811 | |||||||||||
| 2/27/2014 | 10,958 | 21,916 | 43,832 | 676,985 | |||||||||||||||||||||||||
Eric Loughmiller | — | | 165,950 | | 331,901 | | 497,851 | | | | | | | | | | | | |||||||||||
| 2/27/2014 | 97,204 | $30.89 | 641,546 | ||||||||||||||||||||||||||
| 2/27/2014 | | | | | | | | 5,479 | | 10,958 | | 21,916 | | | | | 400,405 | |||||||||||
| 2/27/2014 | 5,479 | 10,958 | 21,916 | 338,493 | |||||||||||||||||||||||||
Stéphane St-Hilaire(5) | — | | 217,182 | | 434,363 | | 651,545 | | | | | | | | | | | | |||||||||||
| 2/27/2014 | 38,884 | $30.89 | 256,634 | ||||||||||||||||||||||||||
| 2/27/2014 | | | | | | | | 2,192 | | 4,384 | | 8,768 | | | | | 160,191 | |||||||||||
| 2/27/2014 | 2,192 | 4,383 | 8,766 | 135,391 | |||||||||||||||||||||||||
Becca Polak | — | | 136,553 | | 273,105 | | 409,658 | | | | | | | | | | | | |||||||||||
| 2/27/2014 | 34,996 | $30.89 | 230,974 | ||||||||||||||||||||||||||
| 2/27/2014 | | | | | | | | 1,973 | | 3,945 | | 7,890 | | | | | 144,150 | |||||||||||
| 2/27/2014 | 1,973 | 3,945 | 7,890 | 121,861 | |||||||||||||||||||||||||
Don Gottwald(6) | — | | 261,694 | | 523,388 | | 785,082 | | | | | | | | | | | | |||||||||||
| | | Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name (a) | Grant Date (b) | Threshold ($)(c) | Target ($)(d) | Maximum ($)(e) | Threshold (#)(f) | Target (#)(g) | Maximum (#)(h) | Number of Securities Underlying Restricted Stock Units (#)(3)(i) | Grant Date Fair Value of Stock Awards ($)(4)(l) | |||||||||||||||||||
Jim Hallett | | — | | 450,000 | | 900,000 | | 1,350,000 | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2/20/2015 | | | | | | | | 28,940 | | 57,879 | | 115,758 | | | | 2,142,681 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2/20/2015 | | | | | | | | | | | | | | 19,293 | | 714,227 | ||||||||||
Eric Loughmiller | — | 168,750 | 337,500 | 506,250 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2/20/2015 | 13,398 | 26,796 | 53,592 | 991,988 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2/20/2015 | 8,932 | 330,663 | ||||||||||||||||||||||||||
Don Gottwald | | — | | 275,000 | | 550,000 | | 825,000 | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2/20/2015 | | | | | | | | 7,369 | | 14,738 | | 29,476 | | | | 545,601 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2/20/2015 | | | | | | | | | | | | | | 4,913 | | 181,879 | ||||||||||
Stéphane St-Hilaire(5) | — | 225,000 | 450,000 | 675,000 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2/20/2015 | 4,824 | 9,647 | 19,294 | 357,132 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2/20/2015 | 3,216 | 119,056 | ||||||||||||||||||||||||||
John Kett | | — | | 225,000 | | 450,000 | | 675,000 | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2/20/2015 | | | | | | | | 4,824 | | 9,647 | | 19,294 | | | | 357,132 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2/20/2015 | | | | | | | | | | | | | | 3,216 | | 119,056 | ||||||||||
Additional information concerning our cash and equity incentive plans may be found in the sections titled "Elements"Compensation Discussion and Analysis—Elements Used to Achieve Compensation Philosophy and Objectives—Annual Cash Incentive Programs" and "Long-Term Incentive Opportunities," respectively.
| | | |
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |
| | Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name (a) | Number of Securities Underlying Unexercised Options (#) Exercisable (b) | Number of Securities Underlying Unexercised Options (#) Unexercisable (c) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not Vested ($) (j) | Number of Securities Underlying Unexercised Options (#) Exercisable (b) | Number of Securities Underlying Unexercised Options (#) Unexercisable (c) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not Vested ($) (j) | ||||||||||||||||||||||
Jim Hallett | | 37,500 | | | | | | 13.46 | | 03/01/2020 | | | | | 37,500 | | | 13.46 | 03/01/2020 | | | |||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 112,500 | | | 13.46 | 03/01/2020 | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 48,601 | 145,803(1) | | 30.89 | 02/27/2024 | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 268,818(2) | 9,954,331(2) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 43,832(3) | 1,623,099(3) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 43,832(4) | 1,623,099(4) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 115,758(5) | 4,286,519(5) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 19,293(6) | 714,420(6) | |||||||||||||||||||||||||||||
Eric Loughmiller | 24,301 | 72,903(1) | 30.89 | 02/27/2024 | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 84,375(1) | 28,125(1) | 13.46 | 03/01/2020 | 134,410(2) | 4,977,202(2) | |||||||||||||||||||||||||||||||
| | | | 194,404(2) | | | | 30.89 | | 02/27/2024 | | | | | | | | | | | | | | | | | | | ||||||||
| 268,818(3) | 9,314,544(3) | 21,916(3) | 811,549(3) | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | 43,832(4) | | 1,518,779(4) | | | | | | | | | | | | | | | ||||||||
| 43,832(5) | 1,518,779(5) | |||||||||||||||||||||||||||||||||||
Eric Loughmiller | | | | 97,204(2) | | | | 30.89 | | 02/27/2024 | | | | | ||||||||||||||||||||||
| 134,410(3) | 4,657,307(3) | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | 21,916(4) | | 759,389(4) | ||||||||||||||||||||||
| 21,916(5) | 759,389(5) | |||||||||||||||||||||||||||||||||||
Stéphane St-Hilaire | | 39,570(6) | | | | 19,785(6) | | 10.00 | | 08/20/2017 | | | | | ||||||||||||||||||||||
| 5,598 | 13.46 | 03/01/2020 | ||||||||||||||||||||||||||||||||||
| | 50,377(1) | | | | 16,793(1) | | 13.46 | | 03/01/2020 | | | | | ||||||||||||||||||||||
| 38,884(2) | 30.89 | 02/27/2024 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | 8,768(4) | | 303,811(4) | ||||||||||||||||||||||
| 8,766(5) | 303,742(5) | |||||||||||||||||||||||||||||||||||
Becca Polak | | 44,180 | | | | | | 10.00 | | 05/06/2019 | | | | | ||||||||||||||||||||||
| 99,405(7) | 33,135(7) | 10.00 | 05/06/2019 | 21,916(4) | 811,549(4) | |||||||||||||||||||||||||||||||
| | | | 34,996(2) | | | | 30.89 | | 02/27/2024 | | | | | | | | | | | | | | | | | | | ||||||||
| 43,012(3) | 1,490,366(3) | 53,592(5) | 1,984,512(5) | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | 7,890(4) | | 273,389(4) | | | | | | | | | | | | | | | ||||||||
| 7,890(5) | 273,389(5) | 8,932(6) | 330,752(6) | |||||||||||||||||||||||||||||||||
Don Gottwald | | 133,922(7) | | | | 59,348(7) | | 10.00 | | 05/06/2019 | | | | | 165,000 | | | 10.00 | 05/06/2019 | | | |||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 29,476(5) | 1,091,496(5) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 4,913(6) | 181,928(6) | |||||||||||||||||||||||||||||
Stéphane St-Hilaire | 59,355 | 10.00 | 08/20/2017 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 5,598 | 13.46 | 03/01/2020 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 67,170 | 13.46 | 03/01/2020 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 9,721 | 29,163(1) | 30.89 | 02/27/2024 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 8,768(3) | 324,679(3) | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 8,766(4) | 324,605(4) | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 19,294(5) | 714,457(5) | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 3,216(6) | 119,088(6) | |||||||||||||||||||||||||||||||||||
John Kett | 28,661 | | | 10.00 | 08/20/2017 | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| 56,585 | | | 10.00 | 08/20/2017 | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 19,294(5) | 714,457(5) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | 3,216(6) | 119,088(6) | |||||||||||||||||||||||||||||
| | | 56 |
held by each Named Executive Officernamed executive officer multiplied by the market price of Company common stock at the close of the last trading day in 2014,2015, which was $34.65$37.03 per share. In calculating the number of PRSUs and their value, we are required by SEC rules to compare our performance through 2014 under the PRSU grants against the threshold, target and maximum performance levels for the grant and report in these columns the applicable potential share number and payout amount.
| |
If the performance is between levels, we are required to report the potential payout at the next highest level. Through December 31, 2014, we exceeded target levels of total stockholder return relative to that of companies within the S&P 500 Index and have accordingly reported the PRSUs at the maximum award level.
| | | 57 |
| OPTION EXERCISES DURING FISCAL YEAR |
| | Option Awards | Option Awards | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | ||||||||||
Jim Hallett | | — | | — | | — | | — | ||||||
Eric Loughmiller | — | — | — | — | ||||||||||
Don Gottwald | | 28,270 | | 780,414 | ||||||||||
Stéphane St-Hilaire | | — | | — | — | — | ||||||||
Becca Polak | — | — | ||||||||||||
Don Gottwald | | 29,000 | | 580,575 | ||||||||||
John Kett | | 75,000 | | 2,066,000 | ||||||||||
| | | |
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
The following is a discussion of the treatment of equity-based awards held by our named executive officers and annual cash incentive awards due to our named executive officers upon certain types of employment terminations or the occurrence of a change in control of the Company. For a discussion of our named executive officers' severance payments and the treatment of their annual cash incentive awards that may become due upon certain types of employment terminations pursuant to their employment agreements, see "Employment Agreements with Named Executive Officers" above.below.
| EQUITY-BASED AWARDS—STOCK INCENTIVE PLAN AND OMNIBUS PLAN |
To the extent a named executive officer's employment agreement does not provide otherwise, the Stock Incentive Plan and the Omnibus Plan (and the related award agreements thereunder) provide for the following treatment of stock options and other equity awards issued pursuant to the plans upon the termination of employment scenarios or a change in control, as set forth below. As a result of the Stock Incentive Plan being frozen by the Company on December 10, 2009, no additional stock options will be granted under this plan. Since December 10, 2009, all grants of stock options and other equity awards have been and will be made pursuant to the terms of the Omnibus Plan. For RSU and PRSU awards granted on and after January 1, 2016, participants who achieve an Early Retirement Date will receive pro rata vesting of RSUs and PRSUs (subject to achievement of performance conditions) based on the number of months worked through their Early Retirement Date plus a credit of an additional 12 months (i.e., "pro rata plus 12 months"). "Early Retirement Date" will mean the date of the executive's voluntary termination of employment after attaining a combination of years of age and service with the Company and its affiliates of at least 70, with a minimum age of 60.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Termination or Change in Control Scenario | | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Award Type | | Voluntary Termination | | Termination by the Company for Cause | | Death, Disability or Retirement | | Termination without Cause or for Good Reason | | Effect of Change in Control or Exit Event | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Unless otherwise specified in an award agreement, all unvested equity-based awards under the Stock Incentive Plan and the Omnibus Plan will be forfeited upon a termination of employment for any reason. | | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Omnibus Plan: Voluntary resignation: vested options remain exercisable for 90 days (or until earlier expiration date). For Cause: all vested and unvested options are cancelled. Stock Incentive Plan: All vested and unvested options are cancelled. | All vested options remain exercisable for one year (or until earlier expiration date). In the event | Unless otherwise specified in an award agreement, vested options remain exercisable for 90 days (or until earlier expiration date). | Single trigger vesting with committee discretion to cash out or | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Termination or Change in Control Scenario | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Type | | Voluntary Termination | | Termination by the Company | |||||||||||||||||||||
for Cause | Death, Disability or | | Termination without Cause or for Good Reason | | Effect of Change in Control or | | |||||||||||||||||||
| | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 TSR PRSUs 2014 CANIPS PRSUs 2015 PRSUs | |||||||||||||||||||||
| Automatic forfeiture. | | Death or Disability: Full vesting of PRSU award based on the | | 2013 PRSUs, 2014 CANIPS PRSUs: Double trigger vesting at target. 2015 PRSUs: Single trigger vesting at target. | | |||||||||||||||||
| | | |
| | | | | | | | | | | | | | | | | | | | | | | |||
| Voluntary Termination (with or without Good Reason), Retirement or Termination by the Company (for Cause or without Cause): Forfeiture of any unvested 2015 RSUs. Death or Disability: Full vesting of any unvested 2015 RSUs. | Single trigger vesting if adjusted net income goal is | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Unless specified otherwise in a named executive officer's employment agreement, the termination of a named executive officer's employment with the Company or any subsidiary shall be deemed to be for "cause" under the Omnibus Plan and the Stock Incentive Plan upon any of the following events: (i) the refusal or neglect of the named executive officer to perform substantially his employment-related duties; (ii) the named executive officer's personal dishonesty, incompetence, willful misconduct, or breach of fiduciary duty; (iii) the named executive officer's indictment for, conviction of, or entering a plea of guilty ornolo contendere to a crime constituting a felony or his willful violation of any applicable law; (iv) the named executive officer's failure to reasonably cooperate, following a request to do so by the Company or any subsidiary, in any internal or governmental investigation; or (v) the named executive officer's material breach of any written covenant or agreement not to disclose any information pertaining to the Company or any subsidiary or not to compete or interfere with the Company or any subsidiary.
| |
Unless specified otherwise in a named executive officer's employment agreement, the termination of a named executive officer's employment with the Company or any subsidiary shall be deemed to be for "good reason" under the Stock Incentive Plan if such named executive officer voluntarily terminates his or her employment with the Company or any subsidiary as a result of (i) the Company or any subsidiary significantly reducing the named executive officer's current salary without the named executive officer's prior written consent; or (ii) the Company or any subsidiary taking any action that would substantially diminish the aggregate value of the benefits provided to the named executive officer under the Company's or such subsidiary's accident, disability, life insurance, or any other employee benefit plans in which the named executive officer participates. The Omnibus Plan does not provide a default "good reason" definition in the event such term is not specified in a named executive officer's employment agreement.
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| ANNUAL CASH INCENTIVE AWARDS—OMNIBUS PLAN |
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Termination or Change in Control Scenario | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||
| Voluntary Termination | | Termination for Cause | | Death, Disability or Retirement | �� | Termination without Cause or for Good Reason | | Effect of Change in Control or Exit Event | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | ||
| | Death, Disability, Voluntary Termination or Termination by the Company | Annual cash incentive awards are treated as described in the | ||||||||||||||||||||
Retirement: | Unless otherwise specified in an employment agreement, | |||||||||||||||||||||
| | Unless otherwise determined by the administrator of the Omnibus Plan or as evidenced in an award agreement, | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||
| | | |
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL— |
The amounts in the tablestable below assume that the termination and/or change in control, as applicable, was effective as of December 31, 2014,2015, the last business day of the prior fiscal year, and that the respective named executive officers exercised all options and/or received cash in exchange for vested PRSUs and RSUs at such time. The tables aretable is merely an illustrative examplesexample of the impact of a hypothetical termination of employment or change in control. The amounts that would actually be paid upon a termination of employment can only be determined at the time of such termination, based on the facts and circumstances then prevailing.
| Named Executive Officer and Triggering Event | Cash Severance | Non- Equity Incentive Pay (1) | Stock Options (2) | PRSUs (3) | RSUs (4) | Excise Tax Gross- Up (5) | Life Insurance (6) | Total | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Jim Hallett | | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• Death | — | $ | 1,023,613 | $ | 895,230 | $ | 9,273,962 | $ | 714,420 | — | $ | 800,000 | $ | 12,707,225 | |||||||||||
• Disability (7) | | — | $ | 1,023,613 | $ | 895,230 | $ | 9,273,962 | $ | 714,420 | | — | | — | $ | 11,907,225 | |||||||||
• Retirement (8) | — | $ | 1,023,613 | — | — | — | — | — | $ | 1,023,613 | |||||||||||||||
• Voluntary / for Cause | | — | | — | | — | | — | | — | | — | | — | | — | |||||||||
• Termination w/o Cause or for Good Reason | $ | 3,600,000 (9) | $ | 1,023,613 | — | $ | 5,398,808 | — | — | — | $ | 10,022,421 | |||||||||||||
• CIC (single trigger) | | — | $ | 1,023,613 | $ | 895,230 | $ | 2,207,591 | $ | 714,420 | | — | | — | $ | 4,840,854 | |||||||||
• Termination after CIC (double trigger) | $ | 3,600,000 (9) | $ | 1,023,613 | $ | 895,230 | $ | 9,273,962 | $ | 714,420 | $ | 4,085,563 | — | $ | 19,592,788 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Eric Loughmiller | | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• Death | $ | 13,560 (10) | $ | 383,855 | $ | 447,624 | $ | 4,555,245 | $ | 330,752 | — | $ | 800,000 | $ | 6,531,056 | ||||||||||
• Disability (7) | $ | 13,560 (10) | $ | 383,855 | $ | 447,624 | $ | 4,555,245 | $ | 330,752 | | — | | — | $ | 5,731,036 | |||||||||
• Retirement (8) | — | — | — | — | — | — | — | — | |||||||||||||||||
• Voluntary / for Cause | | — | | — | | — | | — | | — — | | — | | — | | — | |||||||||
• Termination w/o Cause or for Good Reason | $ | 801,060 (9) | $ | 383,855 | — | $ | 2,419,991 | — | — | — | $ | 3,604,906 | |||||||||||||
• CIC (single trigger) | | — | $ | 383,855 | $ | 447,624 | $ | 1,022,039 | $ | 330,752 | | — | | — | $ | 2,184,270 | |||||||||
• Termination after CIC (double trigger) | $ | 801,060 (9) | $ | 383,855 | $ | 447,624 | $ | 4,555,245 | $ | 330,752 | — | — | $ | 6,518,536 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Don Gottwald | | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• Death | $ | 19,644 (10) | $ | 625,541 | — | $ | 562,129 | $ | 181,928 | — | $ | 800,000 | $ | 2,189,242 | |||||||||||
• Disability (7) | $ | 19,644 (10) | $ | 625,541 | | — | $ | 562,129 | $ | 181,928 | | — | | — | $ | 1,389,242 | |||||||||
• Retirement (8) | — | — | — | — | — | — | — | — | |||||||||||||||||
• Voluntary / for Cause | | — | | — | | — | | — | | — | | — | | — | | — | |||||||||
• Termination w/o Cause or for Good Reason | $ | 1,119,644 (9) | $ | 625,541 | — | $ | 187,376 | — | — | — | $ | 1,932,561 | |||||||||||||
• CIC (single trigger) | | — | $ | 625,541 | | — | $ | 562,129 | $ | 181,928 | | — | | — | $ | 1,369,598 | |||||||||
• Termination after CIC (double trigger) | $ | 1,119,644 (9) | $ | 625,541 | — | $ | 562,129 | $ | 181,928 | — | — | $ | 2,489,242 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Stéphane St-Hilaire | | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• Death | $ | 13,560 (10) | $ | 553,145 | $ | 179,061 | $ | 713,356 | $ | 119,088 | — | $ | 800,000 | $ | 2,378,210 | ||||||||||
• Disability (7) | $ | 13,560 (10) | $ | 553,145 | $ | 179,061 | $ | 713,356 | $ | 119,088 | | — | | — | $ | 1,578,210 | |||||||||
• Retirement (8) | — | — | — | — | — | — | — | — | |||||||||||||||||
• Voluntary / for Cause | | — | | — | | — | | — | | — | | — | | — | | — | |||||||||
• Termination w/o Cause or for Good Reason | $ | 913,560 (9) | $ | 553,145 | — | $ | 343,324 | — | — | — | $ | 1,810,029 | |||||||||||||
• CIC (single trigger) | | — | $ | 553,145 | $ | 179,061 | $ | 367,951 | $ | 119,088 | | — | | — | $ | 1,219,245 | |||||||||
• Termination after CIC (double trigger) | $ | 913,560 (9) | $ | 553,145 | $ | 179,061 | $ | 713,356 | $ | 119,088 | — | — | $ | 2,478,210 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
John Kett | | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• Death | $ | 19,366 (10) | $ | 481,030 | — | $ | 367,951 | $ | 119,088 | — | $ | 800,000 | $ | 1,787,435 | |||||||||||
• Disability (7) | $ | 19,366 (10) | $ | 481,030 | | — | $ | 367,951 | $ | 119,088 | | — | | — | $ | 987,435 | |||||||||
• Retirement (8) | — | — | — | — | — | — | — | — | |||||||||||||||||
• Voluntary / for Cause | | — | | — | | — | | — | | — | | — | | — | | — | |||||||||
• Termination w/o Cause or for Good Reason | $ | 919,366 (9) | $ | 481,030 | — | $ | 122,650 | — | — | — | $ | 1,523,046 | |||||||||||||
• CIC (single trigger) | | — | $ | 481,030 | | — | $ | 367,951 | $ | 119,088 | | — | | — | $ | 968,069 | |||||||||
• Termination after CIC (double trigger) | $ | 919,366 (9) | $ | 481,030 | — | $ | 367,951 | $ | 119,088 | — | — | $ | 1,887,435 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
|
| | Severance | Non-Equity Incentive Pay(1) | KAR Stock Options(2) | KAR PRSUs(3) | Excise Tax Gross-up(4) | Other (Life Ins)(5) | Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Death | | — | $ | 1,106,118 | | — | $ | 2,096,360 | | — | $ | 800,000 | $ | 4,002,478 | ||||||||
Disability(6) | — | $ | 1,106,118 | — | $ | 2,096,360 | — | — | $ | 3,202,478 | ||||||||||||
Retirement | | — | $ | 1,106,118 | | — | $ | 2,096,360 | | — | | — | $ | 3,202,478 | ||||||||
Voluntary Termination | — | — | — | — | — | — | — | |||||||||||||||
Termination for Cause | | — | | — | | — | | — | | — | | — | | — | ||||||||
Term w/o Cause or for Good Reason | $ | 3,600,000 | (7) | $ | 1,106,118 | — | $ | 2,096,360 | — | — | $ | 6,802,478 | ||||||||||
Change in Control (single trigger) | | — | $ | 1,106,118 | $ | 1,326,928 | | — | | — | | — | $ | 2,433,046 | ||||||||
Termination after Change in Control (double trigger) | $ | 3,600,000 | (7) | $ | 1,106,118 | $ | 1,326,928 | $ | 8,376,499 | $ | 3,824,146 | — | $ | 18,233,691 | ||||||||
| | | 63 |
| |
Tableabove); and (ii) for all other named executive officers, (a) one times the sum of Contents
|
| | Severance | Non-Equity Incentive Pay(1) | KAR Stock Options(2) | KAR PRSUs(3) | Excise Tax Gross-up | Other (Life Ins)(4) | Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Death | $ | 15,407 | (5) | $ | 407,913 | | — | $ | 1,048,266 | | — | $ | 800,000 | $ | 2,271,586 | |||||||
Disability(6) | $ | 15,407 | (5) | $ | 407,913 | — | $ | 1,048,266 | — | — | $ | 1,471,586 | ||||||||||
Retirement | | — | $ | 407,913 | | — | $ | 1,048,266 | | — | | — | $ | 1,456,179 | ||||||||
Voluntary Termination | — | — | — | — | — | — | — | |||||||||||||||
Termination for Cause | | — | | — | | — | | — | | — | | — | | — | ||||||||
Term w/o Cause or for Good Reason | $ | 789,842 | (7) | $ | 407,913 | — | $ | 1,048,266 | — | — | $ | 2,246,021 | ||||||||||
Change in Control (single trigger) | | — | $ | 407,913 | $ | 365,487 | | — | | — | | — | $ | 773,400 | ||||||||
Termination after Change in Control (double trigger) | $ | 789,842 | (7) | $ | 407,913 | $ | 365,487 | $ | 4,188,423 | — | — | $ | 5,751,665 | |||||||||
| |
|
| | Severance(1) | Non-Equity Incentive Pay(2) | KAR Stock Options(3) | KAR PRSUs(4) | Excise Tax Gross-up | Other (Life Ins)(5) | Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Death | | — | $ | 456,113 | | — | $ | 95,946 | | — | $ | 429,950 | $ | 982,009 | ||||||||
Disability | — | $ | 456,113 | — | $ | 95,946 | — | — | $ | 552,059 | ||||||||||||
Retirement | | — | $ | 456,113 | | — | $ | 95,946 | | — | | — | $ | 552,059 | ||||||||
Voluntary Termination | — | — | — | — | — | — | — | |||||||||||||||
Termination for Cause | | — | | — | | — | | — | | — | | — | | — | ||||||||
Term w/o Cause or for Good Reason | $ | 900,000 | $ | 456,113 | — | $ | 95,946 | — | — | $ | 1,452,059 | |||||||||||
Change in Control (single trigger) | | — | $ | 456,113 | $ | 502,048 | | — | | — | | — | $ | 958,161 | ||||||||
Termination after Change in Control (double trigger) | $ | 900,000 | $ | 456,113 | $ | 502,048 | $ | 365,696 | — | — | $ | 2,223,857 | ||||||||||
| |
|
| | Severance | Non-Equity Incentive Pay(1) | KAR Stock Options(2) | KAR PRSUs(3) | Excise Tax Gross-up | Other (Life Ins)(4) | Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Death | $ | 17,487 | (5) | $ | 335,652 | | — | $ | 345,114 | | — | $ | 728,280 | $ | 1,426,533 | |||||||
Disability(6) | $ | 17,487 | (5) | $ | 335,652 | — | $ | 345,114 | — | — | $ | 698,253 | ||||||||||
Retirement | | — | $ | 335,652 | | — | $ | 345,114 | | — | | — | $ | 680,766 | ||||||||
Voluntary Termination | — | — | — | — | — | — | — | |||||||||||||||
Termination for Cause | | — | | — | | — | | — | | — | | — | | — | ||||||||
Term w/o Cause or for Good Reason | $ | 654,732 | (7) | $ | 335,652 | — | $ | 345,114 | — | — | $ | 1,335,498 | ||||||||||
Change in Control (single trigger) | | — | $ | 335,652 | $ | 131,585 | | — | | — | | — | $ | 467,237 | ||||||||
Termination after Change in Control (double trigger) | $ | 654,732 | (7) | $ | 335,652 | $ | 131,585 | $ | 1,377,026 | — | — | $ | 2,498,995 | |||||||||
| |
|
| | Severance | Non-Equity Incentive Pay(1) | KAR Stock Options | KAR PRSUs | Excise Tax Gross-up | Other (Life Ins)(2) | Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Death | $ | 17,619 | (3) | $ | 617,391 | | — | | — | | — | $ | 800,000 | $ | 1,435,010 | |||||||
Disability(4) | $ | 17,619 | (3) | $ | 617,391 | — | — | — | — | $ | 635,010 | |||||||||||
Retirement | | — | $ | 617,391 | | — | | — | | — | | — | $ | 617,391 | ||||||||
Voluntary Termination | — | — | — | — | — | — | — | |||||||||||||||
Termination for Cause | | — | | — | | — | | — | | — | | — | | — | ||||||||
Term w/o Cause or for Good Reason | $ | 1,117,619 | (5) | $ | 617,391 | — | — | — | — | $ | 1,735,010 | |||||||||||
Change in Control (single trigger) | | — | $ | 617,391 | | — | | — | | — | | — | $ | 617,391 | ||||||||
Termination after Change in Control (double trigger) | $ | 1,117,619 | (5) | $ | 617,391 | — | — | — | — | $ | 1,735,010 | |||||||||||
| |
such date.Table of Contents
| EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS |
Each of our named executive officers has an employment agreement with the Company. A summary of each of the agreements is provided below.
CEO
Mr. Hallett's employment agreement, which became effective as of February 27, 2012, provides for the following severance and change of control payments:
Termination Due to Mr. Hallett's Death or Disability. If Mr. Hallett's employment is terminated as a result of his death or disability, we will pay Mr. Hallett, or in the case of his death, Mr. Hallett's estate or beneficiaries, an amount equal to the sum of (i) any accrued but unpaid base salary and accrued but unused vacation days; (ii) any earned and vested benefits and payments pursuant to the terms of any benefit plan (collectively, the amounts described in (i) and (ii) above are, the "Accrued Obligations"); and (iii) subject to Mr. Hallett or his estate executing a general release of any claims that he may have against the Company (the "Release"), any annual bonus for a prior completed calendar year that has not yet been calculated or paid to Mr. Hallett (the "Earned but Unpaid Bonus").
In addition, if Mr. Hallett is participating in the health plans of the Company at the time of his termination, we will pay him, or in the case of his death, his estate or beneficiaries, his or their premiums attributable to maintaining insurance coverage under COBRA for the shorter of (i) 18 months; or (ii) until Mr. Hallett becomes eligible for comparable coverage under the health plans of another employer (the "Continued Benefits"). Subject to receipt and effectiveness of the Release, we also will pay Mr. Hallett, or his estate or beneficiaries, a prorated bonus based upon the portion of the year during which Mr. Hallett was employed by us (the "Prorated Bonus").
For purposes of Mr. Hallett's employment agreement, "disability" means a "Total Disability" (or equivalent) as defined in the Company's long term disability plan in effect at the time of the disability.
Termination by the Company for Cause. Following a majority vote of the Board of Directors (excluding Mr. Hallett or any other employee of the Company), we may terminate Mr. Hallett's employment at any time for "Cause.
| | | 64 |
"Cause." In such event, our only obligation to Mr. Hallett would be the payment, in a lump sum, of Mr. Hallett's Accrued Obligations.
"Cause" is defined in the employment agreement to mean (i) Mr. Hallett's willful, continued and uncured failure to perform substantially his duties under the employment agreement for a period of 14 days following notice to Mr. Hallett of such failure; (ii) Mr. Hallett engaging in illegal conduct or gross misconduct that is demonstrably likely to lead to material injury to the Company; (iii) Mr. Hallett's indictment or conviction of, or plea ofnolo contendere to, a crime constituting a felony or any other crime involving moral turpitude; or (iv) Mr. Hallett's failure to comply with the provisions of the employment agreement relating to confidential information, intellectual property, non-competition and non-solicitation which is not cured within the 14 day period following written notice to Mr. Hallett of such failure.
Termination by the Company Without Cause. Mr. Hallett's employment may be terminated without Cause at any time upon 30 days' prior written notice. In the event of a termination without Cause, the Company will pay Mr. Hallett the following "Severance Benefits": (i) two times the sum of Mr. Hallett's (a) annual base salary and (b) target bonus for the year in which termination occurs which, for this purpose, shall not equal less than 100% of Mr. Hallett's base salary; (ii) a Prorated
| |
Bonus in a lump sum; and (iii) the Continued Benefits. In addition to the Severance Benefits described above, we will also pay Mr. Hallett the Accrued Obligations and any Earned but Unpaid Bonus.
Termination by Mr. Hallett for Good Reason. Mr. Hallett may terminate his employment for "Good Reason" within 90 days following the occurrence of an event constituting "Good Reason," if such event remains uncured for a period of 30 days following notice of the event by Mr. Hallett to the Company. Upon such termination, the Company will pay Mr. Hallett the sum of the Severance Benefits, the Accrued Obligations and any Earned but Unpaid Bonus.
"Good Reason" is defined in the employment agreement to mean the occurrence of any of the following:
Termination by Mr. Hallett without Good Reason. Mr. Hallett may terminate his employment under the employment agreement at any time without Good Reason upon 30 days' prior written notice. In such event, we will pay Mr. Hallett a lump sum amount equal to the Accrued Obligations.
Termination by Mr. Hallett upon Retirement. Mr. Hallett may voluntarily terminate his employment under the employment agreement due to retirement at any time on or after the third anniversary of the effective date of the employment agreement by announcing his retirement at least 12 months prior to such termination. In the event of such a termination, we will pay Mr. Hallett a lump sum amount equal to the Accrued Obligations and a Prorated Bonus.
Excise Tax Gross-Up. As described above in "—"Compensation Policies and Other Information—Tax and Accounting Considerations—Employment Agreements," Mr. Hallett's employment agreement provides that in the event that any payment or benefit in connection with his employment is or becomes subject to an excise tax under Code Section 4999, the Company will make a cash payment to Mr. Hallett, which after the imposition of all income, employment, excise and other taxes thereon as well as any penalty and interest assessments associated therewith, will be sufficient to place Mr. Hallett in the same after-tax position as he would have been in had such excise tax not applied. However, in the event that a reduction of the total payments due to Mr. Hallett would avoid the application of the excise tax, then the total payments will be reduced to the extent
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necessary to avoid the excise tax, but in no event by more than 10% of the original amount of the total payments due.
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Requirements With Respect to Non-Competition and Non-Solicitation. Upon a termination of employment for any reason, Mr. Hallett is subject to the following two year post-termination restrictive covenants (except in the case of retirement): (i) non-competition restrictions; and (ii) non-solicitation of Company employees and customers.
Other Named Executive Officers
The Company has entered into substantially similar employment agreements with Messrs. Loughmiller, Gottwald and St-Hilaire and Ms. Polak,Kett, providing for their at-will employment and the following severance and change of control payments.
Termination Due to Death or Disability. If Messrs. Loughmiller, Gottwald, or St-Hilaire or Ms. Polak terminate theirKett terminates his employment due to death or disability, the Company will be obligated to pay to the executive (or his/herhis legal representatives) an amount equal to the sum of (i) any earned but unpaid base salary; (ii) accrued but unpaid vacation earned through the date of termination; (iii) unreimbursed business expenses; and (iv) any vested employee benefits. The aggregate of the foregoing is referred to as the "Accrued Obligations." In addition, the executive or his/herhis estate/beneficiaries would be entitled to receive (i) COBRA premium payments for 12 months or until the executive becomes eligible for coverage under another employer's health plan, if the executive is participating in the Company's health plans on the date of such termination of employment, (the "Continued Benefits"); (ii) the prorated portion of his/herhis annual bonus for the calendar year in which such termination of employment occurred, calculated based on the executive's actual performance and based on the number of days the executive was employed by the Company during such calendar year; and (iii) a payment equal to the amount of any annual bonus which has been earned in a prior year but which has not yet been paid to the executive (the "Earned but Unpaid Bonus").
For purposes of their employment agreements, "disability" means a "Total Disability" (or equivalent) as defined in the Company's long term disability plan in effect at the time of the disability.
Voluntary Termination or Termination for Cause. If Messrs. Loughmiller, Gottwald, or St-Hilaire or Ms. PolakKett voluntarily terminates theirhis employment or if the Company terminates theirhis employment for Cause, the Company's sole obligation will be to pay themhim the Accrued Obligations. For purposes of their employment agreements, "Cause" means the (i) executive's willful, continued and uncured failure to perform substantially their duties under the agreement (other than any such failure resulting from incapacity due to medically documented illness or injury) for a period of 14 days following written notice by the Company to the executive of such failure; (ii) executive engaging in illegal conduct or gross misconduct that is demonstrably likely to lead to material injury to the Company, monetarily or otherwise; (iii) executive's indictment or conviction of, or plea ofnolo contendere to, a crime constituting a felony or any other crime involving moral turpitude; or (iv) executive's violation of the restrictive covenants under the agreement or any other covenants owed to the Company by executive.
Termination Without Cause or Resignation for Good Reason. In the event Messrs. Loughmiller, Gottwald, or St-Hilaire or Ms. Polak areKett is terminated by the Company without Cause or such executive resigns for Good Reason, the executive would be entitled to receive, subject to execution and non-revocation of a release of claims, (i) a lump sum cash payment equal to the sum of his/herhis annual base salary plus target annual bonus for the year in which such termination of employment occurs; (ii) the Continued Benefits; and (iii) the Earned but Unpaid Bonus. For purposes of their employment agreements, "Good Reason" means (i) any material reduction of the executive's authority, duties and responsibilities; (ii) any material failure by the Company to comply with any of the terms and conditions of the agreement; (iii) any failure to timely pay or provide the executive's base salary, or any reduction in the executive's base salary, excluding any base salary reduction
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made in connection with across the board salary reductions; (iv) the requirement by the Company that the executive relocate his/herhis principal business location to a location more than 50 miles from the executive's principal base of operation as of the effective date of the agreement; or (v) a Change of Control occurs and, if applicable, the Company fails to cause its successor (whether by purchase, merger, consolidation or otherwise) to assume or reaffirm the
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Company's obligations under the agreement without change. For purposes of the foregoing, "Change of Control" has the same meaning as the term "Change in Control" under the Omnibus Plan.
Requirements With Respect to Non-Competition and Non-Solicitation. Upon a termination of employment for any reason, Messrs. Loughmiller, Gottwald, and St-Hilaire and Ms. PolakKett are subject to the following one year post-termination restrictive covenants: (i) non-competition restrictions; and (ii) non-solicitation of Company employees and customers.
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| CERTAIN RELATED PARTY RELATIONSHIPS |
| REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS |
Pursuant to our written related party transactiontransactions policy, the Company reviews relationships and transactions in which the Company, or one of its business units, and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest.
In the course of the review and approval of a related party transaction, the Board of Directors or the Audit Committee may consider the following factors:
Transactions in which the amount involved exceeds $120,000 in which the Company, or one of its business units, was a participant and a related person had a direct or indirect material interest are required to be disclosed in this proxy statement. There were not any such related party transactions identified for 2014.2015.
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| REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS |
| NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS |
In order to submit stockholder proposals for the 20162017 annual meeting of stockholders for inclusion in the Company's proxy statement pursuant to SEC Rule 14a-8, materials must be received by the Secretary at the Company's principal office in Carmel, Indiana, no later than December 25, 2015.29, 2016.
The proposals must comply with all of the requirements of SEC Rule 14a-8. Proposals should be addressed to: Rebecca C. Polak, Executive Vice President, General Counsel and Secretary, KAR Auction Services, Inc., 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032. As the SEC's shareholder proposal rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
The Company's By-Laws also establish an advance notice procedure with regard to director nominations and stockholder proposals that are not submitted for inclusion in the proxy statement, but that a stockholder instead wishes to present directly at an annual meeting. To be properly brought before the 2016 annual meeting, a notice of the nomination or the matter the stockholder wishes to present at the meeting must be delivered to the Secretary at the Company's principal office in Carmel, Indiana (see above), not less than 90 or more than 120 days prior to the first anniversary of the date of this year's annual meeting. As a result, any notice given by or on behalf of a stockholder pursuant to these provisions of the Company's By-Laws (and not pursuant to SEC Rule 14a-8) must be received no earlier than February 4, 2016,8, 2017, and no later than March 5, 2016.10, 2017. All director nominations and stockholder proposals must comply with the requirements of the Company's By-Laws, a copy of which may be obtained at no cost from the Secretary of the Company.
Other than the proposals described in this proxy statement, KAR Auction Services does not expect any matters to be presented for a vote at the annual meeting. If you grant a proxy, the persons named as proxy holders on the proxy card will have the discretion to vote your shares on any additional matters properly presented for a vote at the annual meeting. If for any unforeseen reason, any one or more of KAR Auction Services' nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.
The chairman of the meeting may refuse to allow the transaction of any business not presented beforehand, or to acknowledge the nomination of any person not made in compliance with the foregoing procedures.
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 MATERIALS AND THE ANNUAL MEETING |
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| Q: | Why am I receiving these materials? | |
| A: | We are |
| Q: | What proposals will be voted on at the annual meeting? | ||
| A: | There are three proposals scheduled to be voted on at the annual meeting: •
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• To amend and restate the |
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To ratify the |
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| What is the |
| A: | The Company's Board of • "FOR" each of the nominees to • "FOR" the • "FOR" the |
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| Who is entitled to vote? | ||
| A: | All shares owned by you as of the These shares include shares that are: • held directly in your name as the stockholder of record; and • held for you as the beneficial owner through a broker, bank or other nominee, including shares purchased under the KAR On the | |
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| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? | |
| A: | Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially. Stockholder of Record. If your shares are registered directly in your name with the Company's transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent to you directly by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to the Company or to vote in person at the annual meeting. You may vote on the Internet, by telephone or by mail, as described below under the heading "How can I vote my shares without attending the annual meeting?" Beneficial Owner. If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in "street name" and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker on how to vote your shares and are also invited to attend the annual meeting. To vote these shares in person at the annual meeting, you must obtain a signed proxy from the stockholder of record giving you the right to vote the shares. You may also vote by Internet, by telephone or by mail, as described below under "How can I vote my shares without attending the annual meeting?" | |
| Q: | How can I vote my shares in person at the annual meeting? | |
| A: | Stockholder of Record. Shares held directly in your name as the stockholder of record may be voted in person at the annual meeting. If you choose to vote your shares in person at the annual meeting, please bring proof of identification. Even if you plan to attend the annual meeting, the Company strongly recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the annual meeting. See "How can I vote my shares without attending the annual meeting?" Beneficial Owner. Shares held in street name may be voted in person by you only if you obtain an account statement or letter from your bank, broker or other nominee indicating that you are the beneficial owner of the shares and a legal proxy from the stockholder of record giving you the right to vote the shares. The account statement or letter must show that you were the beneficial owner of shares on April 13, 2016, the record date. | |
| Q: | How can I vote my shares without attending the annual meeting? | |
| A: | Whether you hold your shares directly as the stockholder of record or beneficially in street name, you may direct your votewithout attending the annual meeting by voting in one of the following manners: • Internet. Go towww.proxyvote.com and follow the instructions. You will need the control number included on your proxy card or voting instruction form; • Telephone. Dial 1-800-690-6903. You will need the control number included on your proxy card or voting instruction form; or • Mail. Complete, date and sign your proxy card or voting instruction card and mail it using the enclosed, pre-paid envelope. If you vote on the Internet or by telephone, you do not need to return your proxy card or voting instruction card. Internet and telephone voting for stockholders will be available 24 hours a day, and will close at 11:59 p.m., Eastern Daylight Time, on June 7, 2016. | |
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| Q: | If I am an employee holding shares pursuant to the Employee Stock Purchase Plan, how will my shares be voted? | |
| A: | Employees holding stock acquired through the Employee Stock Purchase Plan will receive a voting instruction card covering all shares held in their individual account from Computershare, the plan record keeper. The voting instruction cards have an earlier return date than proxy cards. The record keeper for the Employee Stock Purchase Plan will vote your shares (i) in accordance with the specific instructions on your returned voting instruction card; or (ii) in its discretion, if you return a signed voting instruction card with no specific voting instructions. | |
| Q: | What is the quorum requirement for the annual meeting? | |
| A: | A quorum is necessary to hold the annual meeting. A quorum at the annual meeting exists if the holders of a majority of the Company's capital stock issued and outstanding and entitled to vote at the annual meeting are present in person or represented by proxy. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker does not vote on some matter on the proxy card because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. | |
| Q: | What happens if I do not give specific voting instructions? | |
| A: | Stockholder of Record. If you are a stockholder of record and you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board of Directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the annual meeting. Beneficial Owners. If you are a beneficial owner of shares held in street name and do not provide the organization (e.g., broker or bank) that holds your shares in "street name" with specific voting instructions, the organization that holds your shares may generally vote on routine matters (Proposal No. 3 (ratification of independent registered public accounting firm)) but cannot vote on non-routine matters (Proposal No. 1 (election of directors) and Proposal No. 2 (amendment and restatement of the Amended and Restated Certificate of Incorporation)). If the organization that holds your shares does not receive instructions from you on how to vote your shares on Proposal No. 1 and/or Proposal No. 2, such organization will inform the inspector of election that it does not have the authority to vote on these matters with respect to your shares. This is generally referred to as a "broker non-vote." Therefore, we urge you to give voting instructions to your broker. Shares represented by such broker non-votes will be counted in determining whether there is a quorum. Because broker non-votes are not considered shares entitled to vote, they will have no effect on the outcome of any proposal other than reducing the number of shares present in person or by proxy and entitled to vote from which a majority is calculated. | |
| Q: | Which proposals are considered "routine" or "non-routine?" | |
| A: | The ratification of the appointment of KPMG as our independent registered public accounting firm for 2016 (Proposal No. 3) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal No. 3. The election of directors (Proposal No. 1) and the amendment and restatement of the Amended and Restated Certificate of Incorporation (Proposal No. 2) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposal No. 1 and Proposal No. 2. | |
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| Q: | What is the voting requirement to approve each of the proposals? | |
| A: | Nine director nominees have been nominated for election at the annual meeting. Because this is an uncontested election, the director nominees will be elected by a majority of the votes cast in the election of directors at the annual meeting, either in person or represented by a properly authorized proxy. This means that a director nominee will be elected to the Company's Board of Directors if the votes cast "FOR" such director nominee exceed the votes cast "AGAINST" him or her. Abstentions and broker non-votes will have no effect on the outcome of the election of directors. The amendment and restatement of the Amended and Restated Certificate of Incorporation (Proposal No. 2) and the ratification of the appointment of our independent registered public accounting firm (Proposal No. 3) require the affirmative vote of a majority of the votes represented at the annual meeting and entitled to vote on the proposal. In accordance with Delaware law, only votes cast "FOR" a matter constitute affirmative votes. A properly executed proxy marked "ABSTAIN" with respect to the ratification of the appointment of our independent registered public accounting firm will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, with respect to Proposal No. 2 and Proposal No. 3, abstentions will have the same effect as negative votes or votes "AGAINST" that matter. | |
| Q: | What does it mean if I receive more than one proxy or voting instruction card? | |
| A: | It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive. | |
| Q: | Who will count the vote? | |
| A: | The votes will be counted by the inspector of election appointed for the annual meeting. | |
| Q: | Can I revoke my proxy or change my vote? | |
| A: | Yes. You may revoke your proxy or change your voting instructions at any time prior to the vote at the annual meeting by: • providing written notice of revocation to the Secretary of the Company at 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032; • delivering a valid, later-dated proxy or a later-dated vote on the Internet or by telephone; or • attending the annual meeting and voting in person. Please note that your attendance at the annual meeting in person will not cause your previously granted proxy to be revoked unless you vote in person at the annual meeting. If you wish to revoke your proxy, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken. Shares held in street name may be voted in person by you at the annual meeting only if you obtain a signed proxy from the record holder giving you the right to vote the shares. | |
| Q: | Who will bear the cost of soliciting votes for the annual meeting? | |
| A: | The Board of Directors of the Company is soliciting your proxy to vote your shares of common stock at the annual meeting. KAR Auction Services will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the distribution of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. The Company also may reimburse brokerage firms and other persons representing beneficial owners of shares of KAR Auction Services' common stock for their expenses in forwarding solicitation material to such beneficial owners. | |
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| Q: | I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials? | |
| A: | The Company has adopted a procedure called "householding" which the SEC has approved. Under this procedure, the Company is delivering a single copy of this proxy statement and the Company's Annual Report to multiple stockholders who share the same address unless the Company has received contrary instructions from one or more of the stockholders. This procedure reduces the Company's costs and reduces our impact on the environment. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, a separate copy of this proxy statement and the Company's Annual Report will be promptly delivered to any stockholder at a shared address to which the Company delivered a single copy of any of these documents. If you prefer to receive separate copies of the proxy statement or Annual Report, contact Broadridge Financial Solutions, Inc. by calling 1-866-540-7095 or in writing at 51 Mercedes Way, Edgewood, New York 11717, Attention: Householding Department. In addition, if you currently are a stockholder who shares an address with another stockholder and would like to receive only one copy of future notices and proxy materials for your household, you may notify your broker if your shares are held in a brokerage account or you may notify us if you hold registered shares. Registered stockholders may notify us by contacting Broadridge Financial Solutions, Inc. at the above telephone number or address. | |
| Q: | Why did I receive a notice regarding the internet availability of the proxy materials instead of a paper copy of the proxy materials? | |
| A: | We are making the proxy materials available to stockholders electronically via the Internet under the Notice and Access regulations of the SEC. Most of our stockholders will receive a Notice of Electronic Availability in lieu of receiving a full set of proxy materials in the mail. The notice includes information on how to access and review the proxy materials, and how to vote via the Internet. We believe this method of delivery will decrease costs, expedite distribution of proxy materials to you, and reduce our impact on the environment. Stockholders who receive a notice but would like to receive a printed copy of the proxy materials in the mail should follow the instructions in the notice for requesting such materials. | |
| Q: | How can I obtain a copy of KAR Auction Services' Annual Report on Form 10-K? | |
| A: | Copies of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC, are available to stockholders free of charge on KAR Auction Services' website atwww.karauctionservices.com or by writing to KAR Auction Services, Inc., | |
| Q: | Where can I find the | |
| A: | KAR Auction Services will announce preliminary voting results at the |
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ANNEX I
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KAR AUCTION SERVICES, INC.
The undersigned, Rebecca C. Polak, certifies that she is the Executive Vice President and, General Counseland Secretary of KAR Auction Services, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), and does hereby further certify as follows:
(1) The name of the Corporation is KAR Auction Services, Inc.
(2) The name under which the Corporation was originally incorporated was KAR Holdings, Inc. and the originalCertificate of Incorporationcertificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on November 9, 2006 and amended pursuant to that certificate of amendment filed with the Secretary of State of the State of Delaware on December 19, 2006 (the "Original Certificate of Incorporation"). Pursuant to a certificate of amendment filed with the Secretary of State of the State of Delaware on November 3, 2009, the Corporation changed its name to KAR Auction Services, Inc. On December 9, 2009, the Corporation filed its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware (the "Certificate of Incorporation").
(3) In lieu ofAt a meeting of the Board of Directors of the Corporation (the "Board of Directors") on February 10, 2016, the Board of Directorshas, by unanimous written consent dated December 9, 2009,authorized the amendment and restatement of theCorporation's OriginalCertificate of Incorporation as set forth herein in accordance withthe provisions ofSections141(f),242 and 245 of the General Corporation Law of the State of Delaware.In lieu of aAt the annual meetingand vote of theof stockholders of the Corporation held on June 8, 2016, the stockholders of the Corporation, the Corporation's sole stockholder has, by unanimous written consent dated December 9, 2009, approved the amendment and restatement of theCorporation's OriginalCertificate of Incorporation as set forth herein in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware, and such consent has been filed with the minutes of the proceedings of stockholders of the Corporation.
(4) This Amended and Restated Certificate of Incorporationrestates and integrates andfurther amendsand restates theOriginalCertificate of Incorporation of the Corporation, as heretofore amended or supplemented.
The text of theOriginalCertificate of Incorporationof the Corporationis hereby amended and restated to read in its entirety, as follows:
FIRST: The name of the Corporation is KAR Auction Services, Inc. (hereinafter, the "Corporation").
SECOND: The address of the registered office of the Corporation in the State of Delaware is 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent. The name of its registered agent at that address is National Registered Agents, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH:
(1) Each holder of record of shares of Common Stock shall be entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders of the Corporation on which holders of Common Stock are entitled to vote.
(2) The holders of shares of Common Stock shall not have cumulative voting rights (as defined in Section 214 of the GCL).
(3) Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Amended and Restated Certificate of Incorporation, as it may be amended from time to time, holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation if, as and when declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.
(4) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for the payment of the debt and liabilities of the Corporation and subject to the prior payment in full of the preferential amounts, if any, to which any series of Preferred Stock may be entitled, the holders of shares of Common Stock shall be entitled to receive the assets and funds of the Corporation remaining for distribution in proportion to the number of shares held by them, respectively.
(5) No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.
FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(1)"Trigger Date" shall mean the first date on which (x) KAR Holdings II, LLC (or its successor) ceases, or (y) in the event of a liquidation of KAR Holdings II, LLC, the Equity Sponsors (as defined below) and their affiliates, collectively, cease, to beneficially own (directly or indirectly) shares representing thirty-five percent (35%) or more of the Voting Stock (it being understood that the retention of either direct or indirect beneficial ownership of thirty-five percent (35%) or more of the Voting Stock by KAR Holdings II, LLC (or its successor) or the Equity Sponsors and their affiliates, as applicable, shall mean that the Trigger Date has not occurred); and
(2)"Voting Stock" shall mean the shares of the then outstanding capital stock of the Corporation entitled to vote generally in the election of directors.
SIXTH: No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the GCL as the same exists or may hereafter be amended. If the GCL is amended hereafter to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the GCL, as so amended. Any repeal or modification of this Article SIXTH shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
SEVENTH.: The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by law, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article SEVENTH shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition.
The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article SEVENTH to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses conferred in this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under this Amended and Restated Certificate of Incorporation, the By-Laws of the Corporation, any statute or other law, by agreement, vote of stockholders or approval of the directors of the Corporation or otherwise.
Any repeal or modification of this Article SEVENTH shall not adversely affect any rights to indemnification and to the advancement of expenses of a director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.
EIGHTH.: Any action required or permitted to be taken by the stockholders of the Corporation may be effected only at a duly called annual or special meeting of the stockholders of the Corporation;provided that, prior to the Trigger Date, any action required or permitted to be taken by the stockholders of the Corporation may be effected by a consent in writing signed by the holders of shares representing the lowest requisite number of votes entitled to be cast by the Voting Stock that are permitted to approve any action by written consent under the GCL (provided that, prior to the Trigger Date, in no event shall stockholders holding less than a majority of the shares of Voting Stock be permitted to act by written consent). The ability of stockholders of the Corporation to consent in writing to the taking of any action is hereby specifically denied from and after the Trigger Date.
NINTH.: Meetings of stockholders may be held within or without the State of Delaware, as the By-Lawsof the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.
TENTH.: Except as otherwise required by law, special meetings of stockholders of the Corporation for any purpose or purposes may be called at any time only by (i) the Chief Executive Officer of the Corporation,or (ii) the Board of Directors pursuant to a resolution duly adopted by a majority of the total number of authorized directors then in office which states the purpose or purposes thereof, or (iii) any stockholders who beneficially own thirty-five percent (35%) or more of the Voting Stock. Other than as set forth in clause (iii) of the preceding sentence, any. Any power of the stockholders to call a special meeting of stockholders is hereby specifically denied. No business other than that stated in the notice of such meeting (or any supplement thereto) shall be transacted at any special meeting.
ELEVENTH:
(1)The term "Corporation" shall mean the Corporation and its subsidiaries; and
(2)The term "the Equity Sponsors" shall mean each of GS Capital Partners VI Fund, L.P., GS Capital Partners VI Parallel, L.P., GS Capital Partners VI GmbH & Co. KG, GS Capital Partners VI Offshore Fund, L.P., Kelso Investment Associates VII, L.P., KEP VI, LLC, Axle Holdings II, LLC, ValueAct Capital Master Fund, L.P. and PCap KAR LLC and their respective affiliates and subsidiaries (other than the Corporation and its subsidiaries).
TWELFTH.ELEVENTH: The Corporation expressly elects not to be governed by Section 203 of the GCL.
THIRTEENTH.TWELFTH: In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board of Directors shall have the power without the assent or vote of the stockholders to adopt, amend, alter or repeal the By-Laws of the Corporation. The affirmative vote of at least a majority of the entire Board of Directors shall be required to adopt, amend, alter or repeal the By-Laws of the Corporation.
FOURTEENTH.THIRTEENTH: If any provision or provisions of this Amended and Restated Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law).
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed on its behalf this9thday ofDecemberJune,20092016.
| KAR AUCTION SERVICES, INC. | ||||||
By: | ||||||
Name: | Rebecca C. Polak | |||||
| Title: | Executive Vice President General Counsel and Secretary | |||||
*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 08, 2016 KAR AUCTION SERVICES INC Date: June 08, 2016 Time: 9:00 AM EDT 50 West Washington Street You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. 1234567 1234567 Envelope # # of # Sequence # 1 OF 2 12 15 0000283475_1 R1.0.1.25 Broadridge Internal Use Only Job # Sequence # See the reverse side of this notice to obtain proxy materials and voting instructions. KAR AUCTION SERVICES, INC. 13085 HAMILTON CROSSING BLVD. CARMEL, IN 46032 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 1234567 1234567 1234567 234567 Meeting Information Meeting Type: Annual Meeting For holders as of: April 13, 2016 Location: The Conrad Indianapolis Indianapolis, Indiana 46204 B A R C O D E
Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Have the information that is printed in the box marked by the arrow (located on the by the arrow (located on the following page) in the subject line. How To Vote Please Choose One of the Following Voting Methods marked by the arrow available and follow the instructions. Only 0000283475_2 R1.0.1.25 Vote In Person: Many stockholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. Internal Use 1. Combined Document How to View Online: following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET:www.proxyvote.com 2) BY TELEPHONE:1-800-579-1639 3) BY E-MAIL*:sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before May 25, 2016 to facilitate timely delivery.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" PROPOSALS 2 and 3. 1. Election of Directors Nominees Todd F. Bourell To ratify the Audit Committee's appointment of KPMG LLP as the Company's independent registered public accounting firm for 2016. 3. 1A 1B Donna R. Ecton 1C James P. Hallett 1D Mark E. Hill 1E J. Mark Howell 1F Lynn Jolliffe 1G Michael T. Kestner 1H John P. Larson 1I Stephen E. Smith 2. To approve the amendment and restatement of the Company's Amended and Restated Certificate of Incorporation to provide that the Company's Stockholders may remove any director from office, with or without cause, and other ministerial changes. xxxxxxxxxx Job # Sequence # 0000283475_3 R1.0.1.25 Broadridge Internal Use Only xxxxxxxxxx Cusip Envelope # # of # Sequence # B A R C O D E 23456789012 2 2 2 2 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 Voting items
THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS F 123,456,789,012.12345 Envelope # # of # Sequence # 0000283475_4 R1.0.1.25 Broadridge Internal Use Only THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE Job # Sequence # NAME THE COMPANY NAME INC. - COMMON 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS B123,456,789,012.12345 THE COMPANY NAME INC. - CLASS D123,456,789,012.12345 THE COMPANY NAME INC. - CLASS E123,456,789,012.12345 THE COMPANY NAME INC. - 401 K123,456,789,012.12345 Reserved for Broadridge Internal Control Information
If you would like to reduce the costs incurred by our company in mailing proxy 1234567 VOTE BY MAIL 123,456,789,012.12345 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" PROPOSALS 2 and 3. 1. Election of Directors Nominees Todd F. Bourell For 0 0 0 0 0 0 0 0 Yes 0 Against 0 0 0 0 0 0 0 0 No 0 Abstain 0 0 0 0 0 0 0 0 0 1A For 0 For 0 Against 0 Against 0 Abstain 0 Abstain 0 1B Donna R. Ecton 1I Stephen E. Smith 1C James P. Hallett 1D Mark E. Hill 2. To approve the amendment and restatement of the Company's Amended and Restated Certificate of Incorporation to provide that the Company's Stockholders may remove any director from office, with or without cause, and other ministerial changes. 1E J. Mark Howell 1F Lynn Jolliffe 0 0 0 1G Michael T. Kestner 3. To ratify the Audit Committee's appointment of KPMG LLP as the Company's independent registered public accounting firm for 2016. 1H John P. Larson For address change/comments, mark here. (see reverse for instructions) Please indicate if you plan to attend this meeting Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 02 0000000000 1 OF 1 1 2 0000283476_1 R1.0.1.25 SHARES CUSIP # JOB #SEQUENCE # VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 John Sample 234567P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. 1234567 Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. NAME THE COMPANY NAME INC. - COMMON THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D THE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPA N Y NAME INC. - 401 K CONTROL # SHARES123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 x PAGE1 OF 2 KAR AUCTION SERVICES, INC. 13085 HAMILTON CROSSING BLVD. CARMEL, IN 46032 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 8 8 8 1 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 234567 234567 234567 234567
PROXY KAR AUCTION SERVICES, INC. ANNUAL MEETING OF STOCKHOLDERS - JUNE 8, 2016 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Eric M. Loughmiller and Rebecca C. Polak, and each of them, as true and lawful agents and proxies with full power of substitution in each, to attend and represent the undersigned on all matters to come before the Annual Meeting of Stockholders and to vote as designated on the reverse side, all the shares of common stock of KAR Auction Services, Inc., held of record by the undersigned on April 13, 2016, during or at any adjournment or postponement of the Annual Meeting of Stockholders to be held at 9:00 a.m., EDT, at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204 on Wednesday, June 8, 2016. I hereby acknowledge receipt of the Notice of Annual Meeting of Stockholders and the accompanying Proxy Statement, the terms of which are incorporated by reference, and revoke any proxy previously given by me with respect to such meeting. This proxy will be voted as directed, or if no direction is indicated, the proxy holders will vote the shares represented by this proxy "FOR"each of the nominees listed in Proposal 1 and "FOR" Proposals 2 and 3, and in the discretion of the proxy holders on any other matter that may properly come before the meeting. Address change/comments: (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side 0000283476_2 R1.0.1.25
