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TABLE OF CONTENTS
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. )
| Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 | |
| KAR AUCTION SERVICES, INC. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
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| (2) | Aggregate number of securities to which transaction applies: | |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
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o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
| (2) | Form, Schedule or Registration Statement No.: | |||
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| (4) | Date Filed: | |||
Notice of Annual MeetingandProxy Statement
Annual Meeting of StockholdersJune 8, 2016
April 28, 201624, 2019
Dear Fellow Stockholder:
I would like to cordially inviteThank you to attendfor your continued investment in and support of KAR Auction Services, Inc.'s ("KAR" or the "Company"). You are cordially invited to attend KAR's 2019 annual meeting of stockholders. The meetingstockholders, which will be held on June 8, 2016, at 9:00 a.m., Eastern Daylight Time, athosted virtually. A virtual meeting provides expanded access, improved communication and cost savings for our stockholders and the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204.Company. You will be able to attend the 2019 annual meeting online, vote your shares electronically and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/KAR2019.
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 annualvirtual meeting, in person, you are strongly encouraged to vote your shares in advance through one of the methods described in the proxy statement.
I am pleased to report that 2015 was an excellent year for KAR.KAR had a very successful 2018. We met or exceeded our key financial targets and delivered solid year-over-year growth in total vehicles sold, revenues,grew revenue, adjusted EBITDA and adjusted net income.gross profit and sold approximately 6.0 million vehicles. As an established market leader with an experienced management team, we believe that we are well-positioned to continue drivingfor continued 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 newcomplementary capabilities in North America and internationally, expanding our data analytic capabilities, and enhancing our 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.platform. We are proud that through share buybacks and dividends, in 20152018 we returned approximately $380$338 million to stockholders and invested approximately $253$243 million in our business through capital expenditures and strategic acquisitions.
I would like to express our appreciationThank you again for your continued support of KAR.KAR, our Board of Directors, our employees and our future.
Sincerely,
James P. Hallett
Chairman of the Board and
Chief Executive Officer
This proxy statement is dated April 28, 201624, 2019 and is first being distributed to stockholders on or about April 28, 2016.24, 2019.
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13085 Hamilton Crossing Boulevard
Carmel, Indiana 46032
| NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | ||
| 9:00 a.m., Eastern Daylight Time, on June | ||
| Admission: | To attend the 2019 annual meeting, visitwww.virtualshareholdermeeting.com/KAR2019. You will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials. | |
| Items of | Proposal No. 1: To elect each of the nine | |
Proposal No. 2: To approve, | ||
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 | You are entitled to vote at the 2019 annual meeting and at any adjournments or postponements thereof if you were a stockholder of record at the close of business on April | |
| Voting by | ||
| On Behalf of the Board of Directors, | ||
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April Carmel, Indiana | Rebecca C. Polak |
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Notice of Internet Availability of Proxy Materials for the Annual Meeting
The proxy statement for the 2019 annual meeting and the annual report to stockholders for the fiscal year ended December 31, 2015,2018, 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 our website,www.karauctionservices.com, and click on the "Financials" tab under "Investor Relations" page ofon our website, under the "Proxy Material" link athomepage.
| TABLE OF CONTENTS |
| PROXY STATEMENT SUMMARY | 1 | |
ANNUAL MEETING OF STOCKHOLDERS | 1 | |
ITEMS TO BE VOTED ON AT ANNUAL MEETING OF STOCKHOLDERS | 1 | |
| 2 | |
2018 BUSINESS HIGHLIGHTS | 3 | |
CORPORATE GOVERNANCE HIGHLIGHTS | 4 | |
EXECUTIVE COMPENSATION | 5 | |
| ELECTION OF DIRECTORS: PROPOSAL NO. 1 | ||
DIRECTORS ELECTED ANNUALLY | ||
DIRECTOR INDEPENDENCE | ||
BOARD NOMINATIONS AND DIRECTOR NOMINATION PROCESS | ||
BOARD QUALIFICATIONS AND DIVERSITY | ||
INFORMATION REGARDING THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS | ||
| BOARD OF DIRECTORS STRUCTURE AND CORPORATE GOVERNANCE | ||
ROLE OF THE BOARD OF DIRECTORS | ||
BOARD LEADERSHIP | ||
BOARD OF DIRECTORS MEETINGS AND ATTENDANCE | ||
COMMITTEES OF THE BOARD OF DIRECTORS | ||
BOARD OF DIRECTORS' RISK OVERSIGHT | ||
CORPORATE GOVERNANCE DOCUMENTS | ||
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION | ||
STOCKHOLDER COMMUNICATIONS WITH THE BOARD | ||
EXECUTIVE SESSIONS | ||
| DIRECTOR COMPENSATION | 19 | |
| 19 | |
DIRECTORS DEFERRED COMPENSATION PLAN | 20 | |
DIRECTOR STOCK OWNERSHIP AND HOLDING GUIDELINES | 20 | |
DIRECTOR COMPENSATION PAID IN 2018 | 20 | |
OUTSTANDING DIRECTOR RESTRICTED STOCK AWARDS | 21 | |
| BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK | ||
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | ||
PROPOSAL |
| COMPENSATION DISCUSSION AND ANALYSIS | 25 | |
OVERVIEW | 25 | |
EXECUTIVE SUMMARY | 26 | |
COMPENSATION PHILOSOPHY AND OBJECTIVES | 28 | |
THE ROLE OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE OFFICERS IN DETERMINING EXECUTIVE COMPENSATION | 28 | |
ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY AND OBJECTIVES | 30 | |
COMPENSATION POLICIES AND OTHER INFORMATION | 38 | |
RESULTS OF SAY ON PAY VOTES AT 2018 ANNUAL MEETING | 40 | |
COMPENSATION COMMITTEE REPORT | 40 | |
| ANALYSIS OF RISK IN THE COMPANY'S COMPENSATION STRUCTURE | 41 | |
| SUMMARY COMPENSATION TABLE FOR 2018 | 42 | |
| GRANTS OF PLAN-BASED AWARDS FOR 2018 | 43 | |
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2018 | 44 | |
| OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR 2018 | 46 | |
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL | 47 | |
EQUITY-BASED AWARDS—OMNIBUS PLAN | 47 | |
ANNUAL CASH INCENTIVE AWARDS—OMNIBUS PLAN | 49 | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE | 50 | |
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS | 53 | |
| CEO PAY RATIO | 56 | |
| RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: PROPOSAL NO. 3 | ||
PROPOSAL | ||
REPORT OF THE AUDIT COMMITTEE | ||
FEES PAID TO KPMG LLP |
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
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| CERTAIN RELATED PARTY RELATIONSHIPS | ||
REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS | ||
| REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS | ||
NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS | ||
| 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 2015KAR Auction Services, Inc.'s (the "Company," "KAR" or "KAR Auction Services") 2018 performance, please review the Company's Annual Report on Form 10-K for the year ended December 31, 2015.2018.
| ANNUAL MEETING OF STOCKHOLDERS | ||
| Date and Time: | 9:00 a.m., Eastern Daylight Time, on June | |
| Location: | Online atwww.virtualshareholdermeeting.com/KAR2019 | |
| Record Date: | Stockholders of record as of the close of business on April | |
| NYSE Symbol: | KAR | |
| Registrar and Transfer Agent: | American Stock Transfer & Trust Company, LLC | |
| ITEMS TO BE VOTED ON AT ANNUAL MEETING OF STOCKHOLDERS |
| Proposal | Proposal | Board of Directors' Recommendation | Page | Proposal | Our Board's Recommendation | Page | ||||||
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| 1. | Election of each of the nine director nominees | FOR | 7 | Election of each of the nine director nominees. | FOR each director nominee | 6 | ||||||
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 | Approval, on an advisory basis, of executive compensation. | FOR | 24 | ||||||
3. | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2016 | FOR | 30 | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2019. | FOR | 57 | ||||||
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| BOARD NOMINEES (PAGES 7–12) |
| Name | Age | Director Since | Independent | Primary Occupation | Committee Membership*** | 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 | 72 | 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 | — | |||||||||||||||
| James P. Hallett | 66 | 2007 | No | Chairman of the Board and Chief Executive Officer of KAR Auction Services, Inc. | — | |||||||||||||||
Mark E. Hill | 60 | 2014 | Yes | Managing Partner of Collina Ventures, LLC | NCGC (Chair), RC | 63 | 2014 | Yes | Managing Partner of Collina Ventures, LLC and Chairman and Chief Executive Officer of Lumavate LLC | NCGC (Chair), RC | ||||||||||
J. Mark Howell | 51 | 2014 | Yes | Chief Operating Officer of Angie's List, Inc. | RC (Chair), CC | 54 | 2014 | Yes | President and Chief Executive Officer of Conexus Indiana | RC (Chair), AC | ||||||||||
| Stefan Jacoby | 61 | — | Yes | Automotive Industry Consultant | — | |||||||||||||||
Lynn Jolliffe | 64 | 2014 | Yes | Human Capital and Talent Management Consultant | AC, CC | 67 | 2014 | Yes | Human Capital and Talent Management Consultant | CC, NCGC | ||||||||||
Michael T. Kestner | 62 | 2013 | Yes | Building Products and Automotive Industry Consultant | AC (Chair), RC | 65 | 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 | |||||||||||||||
| John P. Larson* | 56 | 2014 | Yes | Chief Executive Officer of Bestop, Inc. | CC, RC | |||||||||||||||
Stephen E. Smith | 67 | 2013 | Yes | Automotive Industry Consultant | AC, NCGC | 70 | 2013 | Yes | Automotive Industry Consultant | AC, NCGC | ||||||||||
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Business Highlights
For the year ended December 31, 2015, KAR Auction Services, Inc. (the "Company," "KAR" or "KAR Auction Services")2018, the Company again delivered solid growth in volume of total vehicles sold, revenues, adjusted EBITDA and adjusted net income.gross profit. Specific highlights for fiscal 20152018 included:
| approximately $3.8 billion. |  | |||||
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| + 7% | Total vehicles sold by ADESA, Inc. ("ADESA") and Insurance Auto Auctions, Inc. ("IAA") rose approximately 7% to 6.0 million units. | |||||
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 | Gross profit increased approximately 11% to $1.6 billion. | |||||
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Through share buybacks and dividends, in 2018 we returned approximately$338 million to stockholders and invested approximately$243 million in our business through capital expenditures and strategic acquisitions. | ||||||
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| Achieved net income of $328.0 million. |  | |||||
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 | Adjusted EBITDA* rose 7% to $893.9 million. * Adjusted EBITDA is a non-GAAP measure and is defined and reconciled to the most comparable GAAP measure, net income, in our Annual Report on Form 10-K for the year ended December 31, 2018 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—EBITDA and Adjusted EBITDA." |
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Corporate Governance (pages 18-23)
| CORPORATE GOVERNANCE HIGHLIGHTS (PAGES 13–18) |
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, by clicking on "Governance" under the "Investor Relations" page under the link "Corporate Governance":tab.
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: Eight of our nine 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: In 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 another committee of the Board of Directors (in which case the Risk Committee may maintain oversight over such risks through the receipt of reports from such committees).
 | 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 and Committee Independence: Eight of our nine director nominees are independent, and all committees of our Board of Directors (the "Board") are comprised entirely of independent directors. | |
| Executive Sessions: Our independent directors meet in executive session at each regularly scheduled Board meeting. | |
| Lead Independent Director: We have a lead independent director who presides over the executive sessions of the independent directors and serves as the principal liaison between the independent directors and the Company's CEO and Chairman of the Board. | |
| Gender Diversity: More than twenty percent of our Board is comprised of women. | |
| Annual Board and Committee Evaluations: The Board and each committee evaluates its performance each year. | |
| Robust Equity Ownership Requirements for Non-Employee Directors: The stock ownership guideline for our non-employee directors is five times their annual cash retainer. | |
| Robust Equity Retention Requirements for Non-Employee Directors: All shares of our common stock granted to non-employee directors must be held for three years after vesting while serving as a director. | |
| Robust Equity Ownership Requirements for Executive Officers: We have stock ownership guidelines that are applicable to our executive officers. The stock ownership guideline for our CEO is five times his annual base salary, and our CEO currently holds over 20 times his annual base salary. Executive officers are required to hold 60% of vested shares, net of taxes, until stock ownership guidelines are met. | |
| Anti-Hedging and Pledging Policies: Our directors and executive officers are prohibited from hedging or pledging Company stock. | |
| Annual management and CEO evaluation and succession planning review: Our Board conducts an annual evaluation and review of our CEO and each executive officer's performance, development and succession plan. | |
| Board Risk Oversight: The Risk Committee assists the Board in its oversight of: (i) the principal business, financial, technology, operational and regulatory 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 provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to another committee of the Board (in which case the Risk Committee may maintain oversight over such risks through the receipt of reports from such committees). |
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Executive Compensation (pages 33-67)
| EXECUTIVE COMPENSATION (PAGES 25–55) |
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.years. For more information regarding our named executive officer compensation, see "Compensation Discussion and Analysis" and the compensation tables that follow such section.
WHAT WE DO:DO
WHAT WE DON'T DO
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WE DO NOT:
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| ELECTION OF DIRECTORS: PROPOSAL NO. 1 |
| DIRECTORS ELECTED ANNUALLY |
Our Board of Directors has nominated the nine individuals named below to stand for election to the Board of Directors at the annual meeting. Mr. Formanek, who currently serves on our Board of Directors, is not standing for re-election at the annual meeting. 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 the2019 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 20172020 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 2019 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. In making independence determinations, the Board complies with NYSE listing standards and considers all relevant facts and circumstances. Based upon its evaluation, our Board has affirmatively determined that the following current directors and director nominees meet the standards of "independence" established by the NYSE: Todd F. Bourell, Donna R. Ecton, Peter R. Formanek, Mark E. Hill, J. Mark Howell, Stefan Jacoby, Lynn Jolliffe, Michael T. Kestner, John P. Larson and Stephen E. Smith. James P. Hallett, our Chief Executive OfficerCEO 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 boardBoard membership. When formulating its Board of Directors membership recommendations, the Nominating and Corporate Governance Committee may also consider advice and recommendations from others, including third-party search firms, current Board members, management, stockholders and other persons, as it deems appropriate. The Nominating and Corporate Governance Committee has retained a third-party search firm to assist with identifying, screening and evaluating potential candidates.
The Nominating and Corporate Governance Committee uses a variety of methods to identify and evaluate potential candidates. Consideration of candidates typically involves a series of internal discussions, review of candidate information, and interviews with selected candidates. The Nominating and Corporate Governance Committee will consider the candidate against the criteria it has adopted, as further discussed below, in the context of the Board's then-current composition and the needs of the Board and its committees, and will ultimately recommend qualified candidates for election to the Board. Though the Nominating and Corporate Governance Committee does not have a formal policy regarding consideration of director candidates recommended by stockholders, the Nominating and Corporate Governance Committee generally evaluates such candidates in the same manner by which it evaluates director candidates recommended by other sources.
As detailed in both the Nominating and Corporate Governance Committee Charter and the Corporate Governance Guidelines, 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.
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All candidates are considered in light of the needs of the Board of Directors.with due consideration given to the foregoing criteria. 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.
In accordance with its charter, the Board of Directors also considersaddition, a stockholder may nominate candidates for election as a director, of the Company recommended by any stockholder, provided that the recommendingnominating stockholder follows the procedures set forth in Article II, 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 candidatesDeadlines for stockholder nominations for next year's annual meeting are included in the same manner by which it evaluates other director candidates considered by the Board"Requirements, Including Deadlines, for Submission of Directors.
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Table of ContentsProxy Proposals" section on page 61.
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.
| BOARD QUALIFICATIONS AND 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.Board. 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 of gender, race, ethnicity, age, cultural background and professional experience, in considering candidates for boardBoard 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. All of the nominees, with the exception of Stefan Jacoby, are currently directors.directors and were elected by the stockholders at last year's annual meeting. Mr. Jacoby was initially identified and recommended to the Nominating and Corporate Governance Committee as a potential nominee by a third-party search firm. Mr. Jacoby was subsequently recommended by the Nominating and Corporate Governance Committee to the Board for election as a director and the Board has nominated Mr. Jacoby to stand for election as a director at the 2019 annual meeting. 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 servestand for election 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 2019 annual meeting. The ages of the nominees are as of the date of the 2019 annual meeting, June 8, 2016.4, 2019.
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Todd F. BourellDonna R. Ecton
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Skills and Qualifications
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Donna R. Ecton
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James P. Hallett
 | Director since April 2007 Age:66 Chairman of the Board and Chief Executive Officer |
| 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) and Van Houten North America Inc./Andes Candies Inc. (1991 to 1994). | ||
• 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. | ||
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Graduate of Wellesley College (BA) 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
Skills and Qualifications | ||||
✓ More than 40 years of operational and management experience, including as a CEO, with established companies allows Ms. Ecton to provide to our Board | ||||
✓ Experience in running multiple location businesses not only in the U.S., but also in Canada, the U.K. and Australia. | ||||
✓ Significant strategy and risk assessment experience developed in her roles as a management consultant and as a senior executive of multiple companies. | ||||
✓ Substantial financial experience gained in her roles as CEO, COO and other senior executive positions. | ||||
✓ Current and prior service on the board of directors of public companies, including several committee chair roles, provides additional perspective to our | ||||
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James P. Hallett
| 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 | ||||
• 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 and 2005, including President and Chief Executive Officer of ADESA. | ||||
• 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 | ||||
•
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
Skills and Qualifications | ||||
✓ Committed and deeply engaged leader with over 20 years of experience in key leadership roles throughout the Company and over | ||||
✓ 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 | ||||
✓ Utilizes strong communication skills to guide Board discussions and keep our Board | ||||
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Mark E. Hill
| Independent Director since June 2014 Age:
|
J. Mark Howell
 | Independent Director since December 2014 Age: 54 Current Board Committees: Risk Committee (Chair) and Audit Committee |
| Career Highlights | ||
• Managing Partner of Collina Ventures, LLC, a private investment company that invests in software and technology companies, since | ||
• Co-founder and Chairman of Bluelock, LLC, a privately held | ||
• 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 | ||
Skills and Qualifications
Skills and Qualifications | ||||
✓ Significant executive leadership and management experience leading and owning a software and technology-based business provides our Board | ||||
✓ 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
| 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, | |||
• 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 | |||
• Audit Staff and Senior Staff at Ernst & Young LLP. | |||
• Graduate of the University of Notre Dame (BBA in Accounting). | |||
Skills and Qualifications
Skills and Qualifications | ||||
✓ Extensive senior leadership experience at | ||||
✓ 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 JolliffeStefan Jacoby
| Independent Director Nominee Age: 61 |
Lynn Jolliffe
  | Independent Director since June 2014 Age:
|
| Career Highlights | ||
• Consultant in the automotive industry since January 2018. | ||
• Executive Vice President of General Motors Company, a multinational company that designs, manufactures and markets vehicles worldwide, and President of GM International Operations, from August 2013 to January 2018. | ||
• Chief Executive Officer and President of Volvo Car Corporation, a multinational vehicle manufacturer and marketer, from August 2010 to October 2012. | ||
• Served in several capacities at Volkswagen AG, a multinational automotive manufacturing company, between 2004 and 2010, most recently serving as Chief Executive Officer and President of Volkswagen Group of America from 2007 to 2010 and as Executive Vice President of Group Marketing and Sales at Volkswagen AG from 2004 to 2007. | ||
• Chief Executive Officer and President of Mitsubishi Motors Europe, the European headquarters of automotive manufacturer Mitsubishi Motors, from 2001 to 2004. | ||
• Served in a variety of finance and leadership roles at Volkswagen AG from 1985 to 2001. | ||
• Graduate of the University of Cologne, Germany. | ||
Skills and Qualifications | ||
✓ More than 30 years of broad international experience in the automotive industry, including senior management positions with global automakers in Germany, Japan, the Netherlands, Sweden, Singapore and the United States. | ||
✓ Deep insights and understanding of the macro trends and technologies rapidly transforming the automotive industry, including mobility as a service and autonomous vehicles. | ||
✓ Extensive knowledge of customer experience and retail structures. Expansive experience in finance, sales and marketing has given him a deep understanding of the impact of both areas on profitability and successful market growth. | ||
✓ Strong leadership skills in managing and motivating people for establishing momentum for growth and change, building high performance teams in transformative periods and recruiting and retaining senior management. | ||
Career Highlights | ||
• Chief Executive Officer of Jolliffe Solutions, | ||
• Executive Vice President, Global Human Resources of Ingram Micro Inc., a technology distribution company, from June 2007 to June 2015. | ||
– 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
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 the U.S., Canada and abroad. | ||||
✓ Significant experience with executive compensation decisions, strategies and policies for the acquisition and development of employee talent. | ||||
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Michael T. Kestner
| Independent Director since December 2013 Age:
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John P. Larson
 | Lead Independent Director since June 2014 Age: 56 Current Board Committees: Compensation Committee and Risk Committee |
| 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, from August 2013 to December 2015. | ||
• Partner in FocusCFO, LLC, a consulting firm providing | ||
• 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
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 | ||||
✓ 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
| 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
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 | ||||
✓ 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. | ||||
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Stephen E. Smith
| Independent Director since December 2013 Age:
|
Career Highlights | ||||
Consultant in the automotive industry since October 2012. | ||||
Senior Vice President, Financial Services of American Honda Finance Corporation (AHFC), a provider of financial services to automobile, | ||||
Served two terms as Chair of the Vehicle Finance Division for the American Financial Services Association. Member of the Financial Services Roundtable. | ||||
Began career at Bullock's Dept. Stores, a division of Federated Department Stores. Held senior level positions in the credit card division and in store management. | ||||
Member of the board of the directors of Carecredit Corporation, a privately-held consumer credit healthcare company, from 1996 to 2002. | ||||
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, | ||||
Skills and Qualifications
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 creating, building and developing consumer and commercial | ||||||
Extensive experience in managing lease residual setting, vehicle remarketing, dealer inventory financing and vehicle service contracts. | ||||||
Considerable financial skill and expertise. | ||||||
| ✓ | The Board of Directors recommends a vote "FOR" the election of each of the foregoing nine nominees to the Board of Directors. | |
| Proxies solicited by the Board of Directors will be voted "FOR" the election of each of the nine director nominees named in this proxy statement and on the proxy card unless stockholders specify a contrary vote. |
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| BOARD OF DIRECTORS STRUCTURE AND CORPORATE GOVERNANCE |
| ROLE OF THE BOARD OF DIRECTORS |
The Board oversees the Company's Chief Executive OfficerCEO 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, atwww.karauctionservices.com, by clicking on "Governance" under the "Investor Relations" page under the link "Corporate Governance."tab. 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 requiresrequire that the Company separate the roles of Chairman of the Board and Chief Executive Officer,CEO, and the Board of Directors does not have a policy on whether the same person should serve as both the Chief Executive OfficerCEO 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 OfficerCEO 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 OfficerCEO is appropriate for the Company at this time, as it fosters clear accountability, effective decision making and alignment on corporate strategy. Meanwhile,Given Mr. Hallett's unparalleled knowledge of the industry and the Company, the Board believes Mr. Hallett is in the best position to focus the independent directors' attention on critical business matters and to speak for and lead both the Company and the Board. In addition, the Board believes that the appointment of a Lead Independent Director ensureshelps ensure that the Company benefits from effective oversight by its independent directors. Our Lead Independent Director presides over the executive sessions of the independent directors and serves as the principal liaison between the independent directors and the Company's CEO and Chairman of the Board. Our Lead Independent Director, Mr. Larson, has served on the Board since 2014 and has strong communication and leadership skills, as well as extensive knowledge about the Company's strategic objectives, the industry in which we operate, and the areas of strategic importance to the Company.
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 andwith significant authority and responsibilities, including:
| Board Meetings and Executive Sessions | •
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Presides at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent members of the Board. | ||
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| Communications | • Serves as principal liaison on Board-wide issues | |
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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 items. | |
• 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 he or she is available, when appropriate, for consultation and direct communication. | |
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| Chairman and CEO Performance Evaluation and Board Governance | • Together with the Compensation Committee, | |
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| Outside Advisors and Consultants | • Recommends to the independent directors the retention of advisors and consultants who report directly to the Board, and, upon approval by the independent directors, retains such advisors and consultants. |
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| BOARD OF DIRECTORS MEETINGS AND ATTENDANCE |
The Board of Directors held 13ten meetings during 2015.2018. 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 2015.2018. 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 or by telephone (one director attended by phone).stockholders.
| COMMITTEES OF THE BOARD OF DIRECTORS |
In 2015,2018, the Board of Directors maintained threefour standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. In addition,Committee and the Board of Directors established a Risk Committee in July 2015.Committee. 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'our website, atwww.karauctionservices.com, by clicking on the "Governance" tab under "Investor Relations" page under the link "Corporate Governance."on our homepage. 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 | Compensation Committee | Nominating and Corporate Governance Committee | Risk Committee | ||||||
| Todd F. | | | ||||||||
| Donna R. Ecton | | (Chair) | | | ||||||
| James P. Hallett** | ||||||||||
| Mark E. Hill | | (Chair) | | |||||||
| J. Mark Howell | | (Chair) | ||||||||
| Lynn Jolliffe | | | | |||||||
| Michael T. Kestner | ||||||||||
| (Chair) | | |||||||||
| John P. Larson*** | | | | |||||||
| Stephen E. Smith | | |
* Mr. Bourell is not standing for re-election at the 2019 annual meeting.
** Chief Executive Officer and Chairman of the Board
*** Lead Independent Director
A description of each Board committee is set forth below.
Audit Committee
Meetings Held in 2015: Five2018:Nine
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 (including our Code of Business Conduct and Ethics) and significant tax, legal and regulatory matters; reviews and approves related person transactions; 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 member of Messrs. Kestner and Smith and Mmes. Ecton and Jolliffethe Audit Committee is "financially literate" under the rules of the NYSE, and each of Mr.Messrs. Howell and Kestner and Ms. 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 membersmember of the Audit Committee meets 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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Committee Composition Following the Annual Meeting: Following the annual meeting, we expect that the Audit Committee will be comprisedTable of Donna R. Ecton, J. Mark Howell, Michael T. Kestner and Stephen E. Smith, with Mr. Kestner serving as the Chairman. Mr. Howell has been designated as an "audit committee financial expert" as that term is defined by the SEC.Contents
Compensation Committee
Meetings Held in 2015: 2018:Eight
Primary Responsibilities: The Compensation Committee reviews and recommends policies relating to the compensation and benefits of our executive officers and employees. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive OfficerCEO 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 members of the Compensation Committee are independent under the NYSE rules (including the enhanced independence requirements for Compensation Committeecompensation committee members).
Committee Composition Following the Annual Meeting: Following the annual meeting, we expect that the Compensation Committee will be comprised of Todd F. Bourell, Donna R. Ecton, Lynn Jolliffe and John P. Larson, with Ms. Ecton serving as the Chairman.
Nominating and Corporate Governance Committee
Meetings Held in 2015:2018: 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.Board. The Nominating and Corporate Governance Committee also reviews non-employee director compensation on an annual basis and makes recommendations to the Board. 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.
As required by the Company's Corporate Governance Guidelines, the Nominating and Corporate Governance Committee oversees an annual evaluation process of the Board and each committee of the Board. The evaluation process includes a self-evaluation by the Board and each committee. Once the evaluation process is complete, the results are discussed by the full Board and each committee, as applicable, and changes in practices or procedures are considered and implemented as appropriate. The Nominating and Corporate Governance Committee also utilizes the results of this self-evaluation process in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board and making recommendations to the Board with respect to assignments of Board members to various committees. The Lead Independent Director also conducts a personal interview with each Board member to gather in-depth perspectives and candid insight about Board, committee and individual director performance and suggestions for improvement. In addition, each Board member completes an evaluation of each other Board member.
The Nominating and Corporate Governance Committee periodically reviews the format of the evaluation process to ensure that actionable feedback is solicited on the operation of the Board and director performance.
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: One2018: Four
Primary Responsibilities: The Risk Committee was established in July 2015. The Risk Committee assists the Board of Directors in its oversight of (i) the principal business, financial, technology, operational and operationalregulatory 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. The Risk Committee also oversees the Company's enterprise risk management ("ERM") program and has direct oversight over certain risks within the ERM framework.
Independence: All of the current members of the Risk Committee are independent under the NYSE rules.
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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. Oversight of risks to the CompanyCompany's risks 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 newThe 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 another committee of the Board of Directors.Board. Even when the oversight of a specific area of risk has been delegated to another committee, the Risk Committee may maintain oversight over such risks through the receipt of reports from the committee chairpersonschairs to the Risk Committee. The Board of Directors maintains oversight over such risks through the receipt of reports from the chairpersonChairman of the Risk Committee and from the other committees at each regularly scheduled Board of Directors meeting. The Risk Committee and other committee reviews occur principally through the receipt of regular reports from management and third parties on these areas of risk, and discussions with management and third parties 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 covenants and credit rating, if any. The Chief Executive Officerpresident of each primary business unit provides an operational report, which includes information relating to strategic, operational and competitive risks. Finally, the Company's General CounselChief Legal Officer 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 Chairman of the Risk Committee chairperson as well as other committee chairpersons,chairs, which may include a discussion of risks initially overseen by the committees for discussion and input from the Board of Directors.Board. As noted above, in addition to these regular reports, the Risk Committee receives reports on specific areas of risk such as regulatory, cyclical or other risks and reports to the Board of Directors on these matters.
The Board of Directors'Board's leadership structure, through its committees, also supports its role in risk oversight. In general, the committees oversee the following risks:
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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 | |
| Corporate Governance Guidelines | Contains general principles regarding the functions of the Board | |
| Committee Charters | ||
| Lead Independent Director Charter | Sets forth a clear mandate and significant authority and responsibilities for the Lead Independent Director. |
We expect that any amendmentsamendment to or waiver of the codes of ethics or any waivers of their requirements forthat apply to executive officers andor directors will be disclosed on the Company's website. The foregoing documents are available aton our website,www.karauctionservices.com, by clicking on the "Governance" tab under "Investor Relations" page under the "Corporate Governance" linkon our homepage 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 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, 2015,2018, Messrs. Formanek, HowellBourell and Larson and Mmes. Ecton and Jolliffe served as members of the Compensation Committee. None of our executive officers serve, or in fiscal year 2018 has served, 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 2015fiscal year 2018 are now or were previously an officer or employee of the 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.or its subsidiaries.
| STOCKHOLDER COMMUNICATIONS WITH THE BOARD |
Any stockholder or other interested parties desiring to communicate with the Board, the Chairman of the Board, a committee of Directorsthe Board or any of the independent directors individually or as a group regarding the Company may directly contact such directors by delivering such correspondence to the Company's General CounselChief Legal Officer at KAR Auction Services, Inc., 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032. Our Chief Legal Officer reviews all such correspondence and forwards to the applicable director(s) copies of all such applicable correspondence.
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 relevant 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.meeting. The Company's Corporate Governance Guidelines state that the Chairman of the Board of Directors, if(if an independent director,director) or the Lead Independent Director (if the Chairman of the Board is not an 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.applicable. 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-basedstock based incentive compensation to attract and retain independent, qualified candidates to serve on the Board of Directors.Board. 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 reviews director compensation annually, assisted periodically by an independent compensation consultant (most recently by ClearBridge Compensation Group LLC ("ClearBridge") in October 2018). Based in part on the independent compensation consultant's most recent review of our director compensation program and those of the 17 companies in our proxy comparator group (also used in executive compensation benchmarking), the Nominating and Corporate Governance Committee retained Semler Brossyrecommended, and the Board approved, the following changes to our director compensation program to better align it with market practices: (i) annual stock retainer increased to $130,000, effective June 2019 (and will vest after one year as its independentopposed to one-fourth vesting quarterly); (ii) Audit Committee chair fee increased to $25,000, effective February 2019; and (iii) Audit Committee membership fee of $7,500 implemented, effective February 2019. There previously had been no increases in compensation consultant.
paid to our directors since 2016. In setting director compensation, we consider various factors including market comparison studies and other data obtained from Semler Brossy,trends (such as the most recent review in October 2018), the responsibilities of directors generally, including committee chairs, and the significant amount of time that directors expend in fulfilling their duties,duties. In establishing the non-employee director compensation recommendations, the Nominating and Corporate Governance Committee utilized a balance of cash and equity, with the skill level we requiremajority of members of our Board of Directors.the compensation delivered through equity grants. Directors who also serve as employees of the Company do not receive payment for servicesservice as directors.
| CASH AND STOCK RETAINERS |
DirectorsNon-employee directors who served for the entirety of 20152018 received:
| Components of Director Compensation Program | Form of | |||
|---|---|---|---|---|
| | | | | |
| Annual Cash | $ | |||
| Annual Stock | $ | Restricted Stock | ||
| Lead Independent Director Fee | $30,000 | Cash | ||
| Audit and Compensation Committee Chair | $20,000 | Cash | ||
| Nominating and Corporate Governance | ||||
| and Risk Committee Chair | Cash |
All of our directors are reimbursed 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, relevant compensation was prorated according to the number of months during which he or she served in that position during that year.
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| 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 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. DirectorsNon-employee directors also may choose to receive all or a portion of their annual stock retainer in the form of a deferred share account. The planDirector Deferred Compensation Plan provides that the amount of cash in a director's deferred cash account, plus athe number of shares of our common stock equal to the number of shares in the director's deferred share account, will be delivered to a 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, 2014by the Company for at least fourthree years post-vesting while serving as a director, subject to certain exceptions approved by the Nominating 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 Company's stock ownership guidelines, which were adopted in 2015, requireguideline requires each non-employee director to own a minimum of threefive times his or her annual cash retainer amount in shares of Company stock. All non-employee directors are in compliance with this stock ownership guideline.
| DIRECTOR COMPENSATION PAID IN |
The following table provides information regarding the fiscal 2018 compensation paid to our non-employee directors.directors:
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 |
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Total | |||
|---|---|---|---|---|---|---|
| Todd F. Bourell | $85,000 | $115,025 | $200,025 | |||
| Donna R. Ecton | $105,000 | $115,025 | $220,025 | |||
| Mark E. Hill | $95,000 | $115,025 | $210,025 | |||
| J. Mark Howell | $95,000 | $115,025 | $210,025 | |||
| Lynn Jolliffe | $85,000 | $115,025 | $200,025 | |||
| Michael T. Kestner | $105,000 | $115,025 | $220,025 | |||
| John P. Larson | $115,000 | $115,025 | $230,025 | |||
| Stephen E. Smith | $85,000 | $115,025 | $200,025 |
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Mr. Hallett was not entitled to receive any fees or other compensation for serving as a member of our Board of Directorsin 2018 because he was employed by the Company.
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| OUTSTANDING DIRECTOR RESTRICTED STOCK AWARDS |
The following table sets forth information regarding the number of unvested or deferred shares of our common stock held by each non-employee director as of December 31, 2015:2018:
Name | Unvested Shares of Common Stock | Deferred Phantom Shares and Dividend Equivalents(1) | Unvested Shares and Dividend Equivalents(1) | Deferred Phantom Shares and Dividend Equivalents(2) | ||||
|---|---|---|---|---|---|---|---|---|
| Todd F. Bourell | 1,328 | 2,658 | 1,082 | 9,837 | ||||
| Donna R. Ecton | 1,328 | 7,747 | 1,082 | 15,369 | ||||
| Peter R. Formanek | 1,328 | — | ||||||
| Mark E. Hill | 1,328 | 5,978 | 1,082 | 13,446 | ||||
| J. Mark Howell | 1,328 | 3,957 | 1,082 | 11,249 | ||||
| Lynn Jolliffe | 1,328 | 5,978 | 1,070 | 6,498 | ||||
| Michael T. Kestner | 1,328 | 6,041 | 1,082 | 12,603 | ||||
| John P. Larson | 1,328 | 5,978 | 1,082 | 9,736 | ||||
| Stephen E. Smith | 1,328 | 7,747 | 1,070 | 8,421 | ||||
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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, 201611, 2019 of: (1) each person or entity who owns of record or beneficially owns 5% or more of any class of the Company's voting securities of which 137,300,457133,271,194 shares of common stock were outstanding as of April 13, 2016;11, 2019; (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 137,300,457133,271,194 shares of our common stock outstanding as of April 13, 201611, 2019, rather than the percentages set forth in any stockholders'stockholder's Schedule 13D andor Schedule 13G filings.filing. 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 | Shares Beneficially Owned | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Name of Beneficial Owner | Number of Shares(1) | Percent of Class(2) | 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 | |||||||
The Vanguard Group(3) | 13,295,682 | 9.98% | |||||||||
T. Rowe Price Associates, Inc.(4) | 8,391,117 | 6.30% | |||||||||
BlackRock, Inc.(5) | 7,337,570 | 5.51% | |||||||||
NAMED EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES | |||||||||||
Todd F. Bourell | | 2,871 | | * | 11,074 | * | |||||
Donna R. Ecton | 8,039 | * | 16,684 | * | |||||||
Peter R. Formanek | | 38,984 | | * | |||||||
Donald S. Gottwald | 166,039 | * | 38,604 | * | |||||||
James P. Hallett | | 251,601 | | * | 517,837 | * | |||||
Mark E. Hill | 19,743 | * | |||||||||
John C. Hammer | 1,830 | ||||||||||
Mark E. Hill(7) | 45,234 | * | |||||||||
J. Mark Howell | | 4,190 | | * | 12,506 | * | |||||
Stefan Jacoby | — | — | |||||||||
Lynn Jolliffe | 6,242 | * | 14,280 | * | |||||||
Michael T. Kestner | | 11,378 | | * | 19,802 | * | |||||
John Kett(5) | 102,695 | * | |||||||||
John P. Larson | | 6,243 | | * | 10,971 | * | |||||
Eric M. Loughmiller(5) | 63,457 | * | |||||||||
Eric M. Loughmiller(6) | 274,046 | * | |||||||||
Rebecca C. Polak(6) | 92,364 | * | |||||||||
Stephen E. Smith | | 8,038 | | * | 16,230 | * | |||||
Stéphane St-Hilaire(5) | 152,286 | * | |||||||||
Executive officers, directors and director nominees as a group 22 persons(6) | | 1,764,382 | | 1.3 | % | ||||||
Executive officers, directors and director nominees as a group (20 persons)(8) | 1,472,050 | 1.10% | |||||||||
*
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| SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), 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 2015.2018, except that (1) due to a clerical error, Mr. Hallett filed one Form 4 late to report two tax withholding transactions that occurred on December 5, 2018, and (2) due to a technical issue with filing codes caused by a third-party clerical error, Ms. Ecton filed one Form 4 late to report one stock acquisition transaction resulting from the reinvestment of dividends that occurred on October 3, 2018.
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PROPOSAL NO. 2 |
| PROPOSAL |
In accordance with Section 14A of the Exchange Act and related SEC rules, the Company seeks a non-binding advisory vote from its stockholders to approve the compensation of its named executive officers as described in the "Compensation Discussion and Analysis" section beginning on page 25 and the compensation tables that follow such section. The BoardCompany seeks this non-binding advisory vote from its stockholders annually, pursuant to the results of Directors has approved an amendmentthe stockholders' vote at the Company's 2017 annual meeting of stockholders selecting such frequency.
Our executive compensation program includes certain "best practices" in governance and restatementexecutive compensation, including the following:
In deciding how to vote on this proposal, the Board encourages you to read the "Compensation Discussion and Analysis" section and the compensation tables that follow. Because this vote is advisory, it will not be binding upon the Board; however, the Board and the Compensation Committee value our stockholders' opinions, and the Compensation Committee will take into account the outcome 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.advisory vote when considering future executive compensation decisions.
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.
| ✓ | The Board of Directors recommends that you vote "FOR" the advisory vote to approve executive compensation. | |
| Proxies solicited by the Board of Directors will be voted "FOR" the advisory vote to approve executive compensation unless stockholders specify a contrary vote. |
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The Audit Committee has appointed KPMG LLP ("KPMG") to serve as the Company's independent registered public accounting firm for its fiscal year ending December 31, 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 the Company's independent registered public accounting firm since 2006. Although the 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.
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The Audit Committee is composed of four independent directors, each of whom satisfies the independence 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 and serves as the primary communication link between the Board of Directors as the representative of our stockholders, the independent auditors, KPMG LLP and our internal auditors. Our management has the primary responsibility for financial statements and the reporting process, including the systems of internal control and for assessing the effectiveness of internal control over financial reporting. 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 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 recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
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 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
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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.
Michael T. Kestner(Chairman)Donna R. EctonLynn JolliffeStephen E. Smith
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 2015 and 2014 and for other services rendered during 2015 and 2014 to KAR Auction Services and its subsidiaries, as well as all out-of-pocket costs incurred in connection with these services:
Fee Category | 2015 | 2014 | |||||
|---|---|---|---|---|---|---|---|
| Audit Fees(1) | | $2,359,561 | | $2,148,000 | |||
| Audit-Related Fees(2) | 33,000 | 32,500 | |||||
| Tax Fees(3) | | 248,615 | | 96,035 | |||
| All Other Fees(4) | 160,432 | 70,471 | |||||
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| Total Fees | | $2,801,608 | | $2,347,006 | |||
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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.
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| 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:
2018 Executive Compensation Highlights These compensation highlights are discussed in Jim Hallett,Name Title James P. ("Jim") Hallett Chief Executive Officer and Chairman of the Board Eric M. ("Eric") Loughmiller Executive Vice President and Chief Financial Officer John C. ("John") Hammer President of ADESA Donald S. ("Don") Gottwald Chief Operating Officer and Chief Strategy Officer* Rebecca C. ("Becca") Polak Chief Legal Officer and Secretary for KAR and President of TradeRev** 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 ExecutiveStrategy Officer and President of ADESA;Digital, Data andJohn Kett, Chief Executive OfficerThis Compensation Discussion and President of IAA. This CD&AAnalysis is organized into the following six sections:Executive Summary (page 34)Compensation Philosophy and Objectives (page 38)Executive Summary (pages 26–27)
Compensation Philosophy and Objectives (page 28)
The Role of the Compensation Committee and the Executive Officers in Determining Executive Compensation (pages 28–29)
Elements Used to Achieve Compensation Philosophy and Objectives (pages 30–38)
Compensation Policies and Other Information (pages 38–40)
Results of Say on Pay Votes at 2018 Annual Meeting (page 40)Executive Officersform of PRSUs that will pay out based on our Cumulative Operating Adjusted Net Income Per Share performance over a three-year measurement period.Determining Executive Compensation (page 38)more detail below.
Elements Used to Achieve Compensation Philosophy and Objectives (page 40)
Compensation Policies and Other Information (page 49)
Results of Say on Pay Votes at 2014 Annual Meeting (page 51)
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| EXECUTIVE SUMMARY |
Business Highlights
For the year ended December 31, 2015, KAR Auction Services2018, the Company again delivered solid growth in volume of total vehicles sold, revenues, adjusted EBITDA and adjusted net income.gross profit. Specific highlights for fiscal 20152018 included:
| approximately $3.8 billion. | | |||||
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| + 7% | Total vehicles sold by ADESA, Inc. ("ADESA") and Insurance Auto Auctions, Inc. ("IAA") rose approximately 7% to 6.0 million units. | |||||
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| Gross profit increased approximately 11% to $1.6 billion. | |||||
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Through share buybacks and dividends, in 2018 we returned approximately$338 million to stockholders and invested approximately$243 million in our business through capital expenditures and strategic acquisitions. | ||||||
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| Achieved net income of $328.0 million. | | |||||
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| Adjusted EBITDA* rose 7% to $893.9 million. * Adjusted EBITDA is a non-GAAP measure and is defined and reconciled to the most comparable GAAP measure, net income, in our Annual Report on Form 10-K for the year ended December 31, 2018 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—EBITDA and Adjusted EBITDA." |
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| | 26 |
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Our Executive Compensation Practices are Aligned with Stockholders' Interests
We maintain a compensation program structured to achieve a close connection between executive pay and companyCompany performance. We believe that this strong pay-for-performancepay 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.years.
WHAT WE DO:DO
5-year Pay Alignment Chart
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
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| Fiscal Year | 2010 YE | 2011 | 2012 | 2013 | 2014 | 2015 | ||||||
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CEO Pay ($000) | | $1,475 | $1,414 | $5,994 | $4,808 | $4,824 | ||||||
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Indexed TSR | 100 | 97.83 | 148.15 | 223.66 | 270.86 | 297.96 | ||||||
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| Fiscal Year | 2013 YE | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | CEO Pay ($000) | | | | $4,808 | | $4,824 | | $5,078 | | $5,812 | | $6,138 | | ||||||||||||||
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| Indexed TSR | 100 | 121 | 133 | 158 | 193 | 187 | ||||||||||||||||||||||
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WHAT WE DON'T 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 into 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:
While the Company does not target any specific percentile positioning versus the market, the market median is used as a reference point but is not the sole determinant when making compensation decisions. Compensation decisions are made considering a number of factors including experience, tenure, sustained performance, specific requirements of roles relative to the market and individual and Company performance.
| 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 Messrs. HowellBourell 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.
Compensation Committee's Use of Market and Survey Data. In lightAlthough KAR Auction Services is comprised of thea unique mix of businesses that comprise KAR Auction Services and the lack oflacks 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,With assistance from its independent compensation consultant, ClearBridge, the Compensation Committee has attempted to developdeveloped a meaningful peercomparator group for the Company, with help from its independent compensation consultant; however, the Committee has historically stopped short of a formal peer group, in part due to the unique combination of our three separate business segments.
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Table of ContentsCompany.
In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of other comparably-sized companies. Prior to 2015, the Compensation Committee had 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 usinguses 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.compensation levels. In light of the lack of directly comparable companies for KAR'sKAR Auction Services' business, as noted above, companies in the proxy comparator group were selected based on (i) a focus on service-oriented industries; (ii) comparablesimilarly-sized revenue and market capitalization levels (KAR represents the 41st and 53rd percentiles, respectively, within the selected proxy comparator group on these measures);levels; (iii) comparable growth, profitability and/or market valuation profiles; and (iv) the avoidancecompanies with which KAR Auction Services competes for executive talent. Where
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Table of over-representing any one industry. Where Contents
possible, the Compensation Committee included companies that are in related or similar industries to the Company. TheOur proxy comparator group for 2018 has not changed from the comparator group we used in late 2015 consisted2017.
Based on the recommendation of ClearBridge, the Compensation Committee used a proxy comparator group consisting of the following 30 companies:17 companies in making 2018 compensation decisions:
| 2018 Proxy Comparator Group | ||||
|---|---|---|---|---|
Allison Transmission Holdings, Inc. | ||||
| Stericycle, Inc. | ||||
Cintas | ||||
| LKQ Corp. | ||||
| Total System Services, Inc. | ||||
Copart, Inc. | MSC Industrial Direct Co. Inc. | Werner Enterprises, Inc. | ||
CDK Global, Inc. | Old Dominion Freight Line Inc. | |||
| Westinghouse Air Brake Technologies | ||||
ebay Inc. | Pitney Bowes Inc. | Worldpay, Inc. (formerly known as Vantiv, Inc.) | ||
Equifax Inc. | Sotheby's | |||
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 salary2018 compensation levels. The Compensation Committee also considered experience, and tenure, sustained performance, and specific requirements of roles relative to market.market and individual and Company performance.
Role of the Independent Compensation Consultant. The Compensation Committee used Semler BrossyClearBridge as its independent compensation consultant in 2015. During 2015, Semler Brossy2018. ClearBridge provided (i) advice to the Compensation Committee with respect to the assessment of the Company's executive compensation practices; (ii) advice regarding the evaluation of long-term incentive compensation practices; (iii) advice and guidance regarding the design of new long-term equity awards; (iv) advice regarding related compensation matters; (v) advice to the Compensation Committee with respect to annual and long-term incentive plan design; and (vi) guidance on the competitiveness of the executive officers' elements of compensation.
ClearBridge regularly attends Compensation Committee meetings and attends executive sessions as requested by the Chairman of the Compensation Committee. The Compensation Committee has reviewed the independence of Semler BrossyClearBridge in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that the work of Semler BrossyClearBridge for the Compensation Committee does not raise any conflict of interest. All work performed by Semler BrossyClearBridge is and was 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 tofor 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.
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| ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY AND OBJECTIVES |
Elements of 20152018 Executive Compensation Program Design
The following table lists the elements of compensation for our 20152018 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.
our proxy comparator group.
| | Element | Key Characteristics | Why We Pay This Element | How We Determine Amount | 2018 Decisions | ||||||||||||||||||
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Fixed | Base salary | Fixed compensation component payable in cash. Reviewed annually and adjusted when appropriate. | Reward the | ||||||||||||||||||||
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| | 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. |
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Variable | | PRSUs vest at the end of a three-year performance period.
| 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. |
| The Compensation Committee granted PRSUs to all of the named executive officers in 2018. See page 35. | ||||||||||||||||||
| | | | PRSU awards made up 75% of the value of the aggregate long-term incentives granted to the named executive officers in | |||||||||||||||||||
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| | | 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 | 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 | The Compensation Committee granted RSUs to all of the named executive officers in | |||||||||||||||||
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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 2015awarded in 2018 for our CEO and the average of our other named executivesexecutive officers is shown in the charts below. Approximately 80%84% of our CEO's total compensation, and approximately 70%72% of the average total compensation of our other named executive officers, is at-risk, consisting of PRSUs, restricted stock optionsunits ("RSUs") 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.
CEO
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, Company performance, 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 20152018 is described below.
Base Salaries for 2015.2018. In late 20142017 and the first quarter of 2015,2018 (and for Mr. Loughmiller, again in the third quarter of 2018), the Compensation Committee reviewed the base salaries of each of our named executive officers for 2015.2018. After considering multiple factors as noted above, the Compensation Committee approved a base salary adjustment only for Mr. Loughmiller.Messrs. Hallett and Loughmiller and Ms. Polak. The Compensation Committee did not approve a base salary adjustmentsadjustment for Mr. Gottwald because the Compensation Committee determined that his base salary was already set at a competitive level. Mr. Hammer became an employee of the Company effective February 19, 2018, and his base salary was set as part of his initial compensation package.
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The following base salaries were in effect for 2018:
Name | Base Salary | Increase % | Effective Date | |||
|---|---|---|---|---|---|---|
Jim Hallett | $975,000 | 8% | January 1, 2018 | |||
Eric Loughmiller | $525,000 | 5% | January 1, 2018 | |||
| $550,000 | 5% | July 29, 2018 | ||||
John Hammer | $500,000 | N/A | February 19, 2018 | |||
Don Gottwald | $583,495 | 0% | N/A | |||
Becca Polak | $515,000 | 8% | January 1, 2018 |
The base salary increases effective January 1, 2018 for Mr. Hallett and Ms. Polak were based on both a merit review and a market adjustment and for Mr. Loughmiller was based on a merit review. Mr. Loughmiller's salary was further increased effective July 29, 2018 based on a variety of factors, including market positioning, individual performance and the criticality of his role.
Base Salaries for 2019. In late 2018, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2018. After considering multiple factors as noted above, the Compensation Committee approved the following base salaries for 2019:
Name | Base Salary | Effective Date | ||
|---|---|---|---|---|
Jim Hallett | $975,000 | N/A | ||
Eric Loughmiller | $550,000 | N/A | ||
John Hammer | $525,000 | March 1, 2019 | ||
Don Gottwald | $500,000 | January 28, 2019 | ||
Becca Polak | $515,000 | N/A |
The Compensation Committee did not approve a 2019 base salary adjustment for Messrs. Hallett St-Hilaire, Kett or GottwaldLoughmiller or Ms. Polak 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, the contribution of each named executive officer and review of competitive pay practices, the Compensation Committee approved the following base salaries effective January 1, 2016:
Name | Base Salary | Increase % | ||
|---|---|---|---|---|
Jim Hallett | $900,000 | 0% | ||
Eric Loughmiller | $450,000 | 0% | ||
Don Gottwald | $566,500 | 3% | ||
Stéphane St-Hilaire | $459,000 | 2% | ||
John Kett | $463,500 | 3% |
The Compensation Committee did not approve base salary adjustmentsincrease for Messrs. Hallett or Loughmiller becauseMr. Hammer as a market adjustment and to support engagement during a transformative period at ADESA and the Compensation Committee determined that their base salaries were already set at competitive levels.salary adjustment for Mr. Gottwald to reflect his new role. In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of other companies.our proxy comparator group.
Annual Cash Incentive ProgramsProgram
General. Generally, namedNamed 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 KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan, as amended (the "Omnibus Plan"), the grant of cash-based awards to eligible participants is contingent upon the achievement of certain pre-established corporate performance goals as determined by the Compensation Committee.
Use of 20152018 Adjusted EBITDA
In 2015,2018, the Compensation Committee used "2015"2018 Adjusted EBITDA" for KAR Auction Services and/or ADESA, and IAA, depending upon the named executive officer, as the measure ofrelevant metric for determining awards under the Annual Incentive Program.
"Adjusted EBITDA" is equal to EBITDA (earnings before interest expense, income taxes, depreciation and amortization) adjusted to exclude, among other things:
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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.Annual Incentive Program. In 2015,2018, the annual incentive opportunity based on achievement of 2018 Adjusted EBITDA for each named executive officer was as follows:
| | | Bonus Opportunity | Bonus Goal Weighting % 2018 Adjusted EBITDA | |||||||||
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Name | Base Salary | Threshold % of Base Salary | Target % of Base Salary | Superior % of Base Salary | KAR Auction Services | ADESA | ||||||
| Jim Hallett | $975,000 | 62.5 | 125 | 187.5 | 100 | | ||||||
| Eric Loughmiller(1) | $535,417 | 42.5 | 85 | 127.5 | 100 | |||||||
| John Hammer(2) | $500,000 | 50 | 100 | 150 | 50 | 50 | ||||||
| Don Gottwald | $583,495 | 50 | 100 | 150 | 100 | |||||||
| Becca Polak | $515,000 | 37.5 | 75 | 112.5 | 100 | | ||||||
The chart below reflects Adjusted EBITDA performance metrics and achieved results for 2018. The payout percentages are based on the achievement of the performance metrics set forth below, with payment amounts prorated for performance between the established levels.
| Achieved Results | |||||||||
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Target Incentive Opportunity: Base Pay multiplied by Individual Target Opportunity Business Performance Factor: 2018 Adjusted EBITDA of KAR | |||||||||
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The amount
Use of Management by Objectives
In 2018, the Compensation Committee could also, in its discretion, apply the Management by Objectives ("MBO") modifier to be earnedincrease or reduce the annual incentive awards by ourup to plus or minus 10% based on the Compensation Committee's review of each named executive officer's achievement of two or more pre-established objectives, which are tailored to each executive depending on departmental, strategic or operational initiatives and objectives with respect to such executive's role.
Based on each named executive officer's level of achievement of his or her objectives, the Compensation Committee applied the MBO modifier to increase the annual incentive award of each of the named executive officers, underas shown below. For 2019, the Compensation Committee has decided to rely on Company performance exclusively and has not included an MBO modifier in the 2019 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 measuresreviews the Company's business plan approved by the Board 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 believesbelieved would increase stockholder value and which it believed would be achievable given a sustained effortperformance on the part of the named executive officers and which would require increasingly greater effortresults 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 2015,2018, the Compensation Committee did not increase or decrease the performance targets or the payouts of any 20152018 annual incentive program payout.award. As described elsewhere in this proxy statement, the Compensation Committee applied the MBO modifier to the 2018 annual incentive program payout, based on the Compensation Committee's review of the named executive officers' achievement of certain pre-established departmental, strategic or operational initiatives and objectives, which resulted in varying increases in payouts for each named executive officer based on their respective performance.
20152018 Performance Targets. The chart which follows provides the 20152018 Adjusted EBITDA performance targets established by the Compensation Committee for 20152018 as well as the actual level of performance achieved (dollars in millions):
| | 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 | % | |||||
| | Threshold | Target | Superior | Achieved Results(1) | Percentage of Target Award Earned (Adjusted EBITDA) | |||||
|---|---|---|---|---|---|---|---|---|---|---|
KAR Auction Services | $841.75 | $910.00 | $955.50 | $900.22 | 92.83% | |||||
ADESA | $454.00 | $478.53 | $526.39 | $448.76 | 0.00% |
*ADESA's performance targets and achieved results (in the above chart) are used for bonus purposes only and include certain technology expenses recorded in "holding company" expenses. ADESA's
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EBITDA for the year ended December 31, 20152018 was $328.6approximately $893.9 million, and did not include such technology expenses recordedbut for Annual Incentive Program purposes, certain acquisitions consummated in "holding company" expenses.
20152018 Annual Incentive Opportunities.Program Payouts. 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 (165% with the MBO modifier) for superior performance or no payout if performance is below threshold. The following table below shows the annual incentive opportunities for our named executive officers for 2015:
| | | 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 | |||||||
2018. Because KAR Auction Services ADESA and IAA each achieved at least the threshold level of performance in 2018, each of our named executive officers was eligible to receive an award under the Annual Incentive Program for 2015,in 2018, which amounts are set forth in the Summary"Summary Compensation Table (page 53).for 2018" on page 42. Based on the Company's performance during 2015, and2018, the accompanying payout percentages for the different performance goals set forth above and each named executive officer's resulting achievement level with respect to his or her MBO initiatives and objectives
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(described above), our named executive officers earned the following percentages and corresponding payout amounts of their target annual incentive awards:awards as set forth below based on the following formula:
Target Annual Incentive Award × Percentage of Target Award Earned × MBO Modifier = 2018 Payout
Name | Percentage of Target Annual Incentive Award Earned | 2015 Payout | Target Annual Incentive Award | Percentage of Target Award Earned (Adjusted EBITDA) | MBO Modifier | 2018 Payout | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jim Hallett | 113.7% | $1,023,613 | $1,218,750 | 92.83% | 107.75% | $1,219,046 | ||||||
| Eric Loughmiller | 113.7% | $383,855 | $458,854(1) | 92.83% | 108.20% | $460,882 | ||||||
John Hammer | $416,667(2) | 46.42%(3) | 108.75% | $210,318 | ||||||||
| Don Gottwald | 113.7% | $625,541 | $583,495 | 92.83% | 108.80% | $589,324 | ||||||
| Stéphane St-Hilaire(1) | 122.9% | $553,145 | ||||||||||
| John Kett | 106.9% | $481,030 | ||||||||||
Becca Polak | $386,250 | 92.83% | 105.00% | $376,484 | ||||||||
Long-Term Incentive Opportunities
The Company provides long-term incentive compensation opportunities in the form of performance-based restricted stock units ("PRSUs")PRSUs and restricted stock units, and previously had provided performance-based stock options and service-based stock options,RSUs, each as described below. Although we have granted stock options in the past, stock options are not currently part of the Company's long-term incentive program.
20152018 Long-Term Incentive Awards. As previously disclosed, on February 20, 2015,On March 2, 2018, the Compensation Committee granted PRSUs and restricted stock units ("RSUs")RSUs under its long-term incentive program to the Company's named executive officers, as described 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
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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 | Target PRSUs (Cumulative Operating 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 | 54,057 | $2,925,024 | 18,019 | $975,008 | ||||||||
| Eric Loughmiller | 26,796 | $991,988 | 8,932 | $330,663 | 12,735 | $689,091 | 4,245 | $229,697 | ||||||||
John Hammer(1) | 15,594 | $843,791 | 5,199 | $281,318 | ||||||||||||
| Don Gottwald | 14,738 | $545,601 | 4,913 | $181,879 | 14,154 | $765,873 | 4,718 | $255,291 | ||||||||
| Stéphane St-Hilaire | 9,647 | $357,132 | 3,216 | $119,056 | ||||||||||||
| John Kett | 9,647 | $357,132 | 3,216 | $119,056 | ||||||||||||
Becca Polak | 12,492 | $675,942 | 4,164 | $225,314 | ||||||||||||
20152018 Performance-Based RSU Awards
The PRSUs will vest if and to the extent that the sum of the Company's "Cumulative Operating Adjusted Net Income Per Share" exceeds certain levels over the three-year period beginning on January 1, 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 beginning on January 1, 20152018 and ending on December 31, 2017.2020.
"Cumulative Operating Adjusted Net Income Per Share" for a fiscal year is calculated by dividing Operating Adjusted Net Income by the weighted average diluted common shares outstanding per year. "Adjusted"Operating
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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, adjusted to (i) exclude gains/losses from certain nonrecurringnon-recurring and unbudgeted capital transactions, including debt prepayment, debt refinancing, share repurchases and similar items;related financing costs not contemplated in the long term incentive targets; (ii) exclude depreciation and amortization expenses resulting from the revaluationexpense associated with acquired intangible assets recorded during purchase accounting of certain assets at the time of the 2007 merger consistent with the Company's calculation of its reported adjusted net income;acquisitions; (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)(iv) 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)(v) exclude significant asset impairments.impairments; (vi) exclude the impact of adoption of new accounting standards; and (vii) exclude the impact of tax rate changes caused by changes in tax legislation.
The 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.level or higher. 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.levels described above.
20152018 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).anniversary.
Prior Years' Awards.
2014 Stock Option2017 Performance-Based and Performance-BasedTime-Based RSU Awards
As previously disclosed, on February 27, 2014,24, 2017, the Compensation Committee approved the grant ofgranted PRSUs and stock optionsRSUs to certain of the Company's named executive officers, some of which remainremained outstanding theat fiscal year-end 2018. The amounts of whichPRSUs and RSUs are disclosed in the "Outstanding Equity Awards" table belowbelow. Other than the condition that the Company achieve $100 million in adjusted net income in its 2017 fiscal year (as reported by the Company and which condition was satisfied), these awards have terms substantially similar to those granted in 2018. For the year ended December 31, 2018, one-third of the RSUs had vested, as disclosed in the "Option Exercises and Stock Vested" table below.
2016 Performance-Based and Time-Based RSU Awards
As previously disclosed, on February 22, 2016, the Compensation Committee granted PRSUs and RSUs to certain of the Company's named executive officers, some of which remained outstanding at fiscal year-end 2018. Other than with respect to the extent they remain outstanding.double-trigger vesting upon a change in control of the Company described above, these awards have terms substantially similar to those granted in 2017.
For the year ended December 31, 2018, an additional one-third of the RSUs had vested, as disclosed in the "Option Exercises and Stock Vested" table below.
The stock options have an exercise pricenumber of $30.89 per share and vest in equal 25% incrementsPRSUs that vested on February 19, 2019 was determined based on the first four anniversariessum of the grant date, subject toCompany's Cumulative Operating Adjusted Net Income Per Share exceeding certain levels over the executive's continued employment withthree-year period beginning on January 1, 2016 and ending on December 31, 2018. The amounts of PRSUs and RSUs are disclosed in the Company through each such anniversary."Outstanding Equity Awards" table below.
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Fifty percent
The number of PRSUs that vested based on Cumulative Operating Adjusted Net Income Per Share achieved was determined in accordance with 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.chart below:
Measurement Period | Number of PRSUs Vesting | |
|---|---|---|
Below Threshold: | ||
Below | 0% of Target | |
Threshold: | ||
| 50% of Target | |
Target: | ||
| 100% of Target | |
Maximum: | ||
Greater than or equal to | 200% of Target |
The remaining 50%Company achieved Cumulative Operating Adjusted Net Income Per Share of $6.95 versus a target of $6.72 for the three-year performance period ended December 31, 2018. As such, on February 19, 2019, based on the Cumulative Operating Adjusted Net Income Per Share achieved, 117.1% of the 2016 PRSUs vest ifvested above the target level but below the maximum level and toresulted in the extent thatfollowing number of PRSUs vesting:
Name | Number of PRSUs Vesting (including dividend equivalents) | 2016 PRSU Payout(1) | ||
|---|---|---|---|---|
Jim Hallett | 83,528 | $4,497,983 | ||
Eric Loughmiller | 36,004 | $1,938,815 | ||
John Hammer | N/A | N/A | ||
Don Gottwald | 20,396 | $1,098,325 | ||
Becca Polak | 12,673 | $682,441 |
2015 Performance-Based RSU Awards
As previously disclosed, on February 6, 2018, the 2015 PRSUs vested above the target performance level but below the maximum performance level based on the sum of the Company's Cumulative Adjusted Net Income Per Share (as described above with respect to the 2015 PRSUs) exceedsexceeding certain levels over the three-year period beginning on January 1, 20142015 and ending on December 31, 2016.
2013 Performance-Based RSU Awards
As previously disclosed, on December 13, 2013, the Compensation Committee approved the grant of PRSUs to certain of the Company's named executive officers which, as applicable, are disclosed in the "Outstanding Equity Awards" table.
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 the levels described in the table above with respect to the 2014 PRSUs (earned based on total stockholder return) over the three-year period beginning on the grant date.
Legacy Long-Term Incentive 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.2017.
PlansPlan 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, and it has since been amended and restated, as amended.approved by the stockholders. Under the Omnibus Plan, participants are eligible to receive stock options, restricted stock, restrictedRSUs (with or without performance conditions), stock units, SARs,appreciation rights, other stock-based awards and/or cash-based awards, each 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.
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").officer. 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.disability insurance. We also provide travel insurance to all employees who travel for business purposes.
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We also provide certain enhanced retirement vesting of equity-incentive awards as described in "Potential Payments Upon Termination of Change in Control—Potential Payments Upon Termination of Change of Control Table".
Perquisites
In general,The Company provides the named executive officers a limited number of perquisites that the Compensation Committee believes that the provision of a certain level of perquisites and other personal benefits to the named executive officers isare reasonable and consistent with the objective of facilitatingattracting and allowing us to attract and retainretaining 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.premiums and relocation benefits under the Company's mobility program. Please see footnote 4 to the Summary"Summary Compensation Table for 2018" on page 42 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 Servicesthe Company or one of its subsidiaries. A description of these agreements can be found in the section titled "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"of 1986, as amended (the "Code") 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 of the Code, then 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 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, Hammer or Gottwald, St-Hilaire and Kettor Ms. Polak contain excise tax gross-up provisions.
Tax Deductibility of Awards Under the Omnibus Plan. CertainSection 162(m) of the Code ("Section 162(m)") generally disallows a federal tax deduction by the Company for compensation paid to Covered Employees (as defined in Section 162(m)) in excess of $1,000,000. Historically, compensation that qualified as "performance-based compensation" under Section 162(m) could be excluded from this limit. This exception has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to the Covered Employees in excess of $1,000,000 will not be deductible by the Company unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
The Compensation Committee historically structured certain awards under the Omnibus Plan are designed so that they maycould comply with the performance-based"performance-based compensation" exception for purposes of Section 162(m) and be
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deductible by the Company for federal income tax purposes. However, because of the continued development of the application and interpretation of Section 162(m) and the regulations issued thereunder, we cannot guarantee that compensation exceptionintended to satisfy the $1,000,000 per person annualrequirements for deductibility limit under Section 162(m) applicable, as in effect prior to Covered Employees. 2018, would or will in fact be deductible.
Though tax deductibility is one of many factors considered by the Compensation Committee when determining executive compensation, the Compensation Committee retainsbelieves that the discretiontax deduction limitation should not be permitted to awardcompromise our ability to design and maintain executive compensation arrangements that exceeds or does not qualify forwill attract and retain the Section 162(m) deductibility limit.executive talent to compete successfully. 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. The Company's clawback policy provides 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 policywhich prohibits our officers and 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 Guidelines and Stock Holding GuidelinesRequirement
In 2015, weThe Compensation Committee adopted the following stock ownership guidelines which are applicable to our named executive officers.
officers:
Title | Stock Ownership Guideline | |||||
|---|---|---|---|---|---|---|
| CEO | 5 times annual base salary | |||||
| Other Named Executive Officers | 3 times annual base salary |
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The named executive officers must hold 100%60% of the vested shares, net sharesof taxes, of Company stock received under awards granted on or after January 1, 2015 until the applicable ownership guideline is met. In addition, ourAll named executive officers are required to hold 100%own shares in excess 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 areguidelines, except for Mr. Hammer who became an employee of the Company on February 19, 2018 and is subject to the Company's director stock ownership andaforementioned 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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Table of Contentsrequirement.
| RESULTS OF SAY ON PAY VOTES AT |
At the Company's 20142018 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%94% of the votes on the matter were cast to approve the Company's executive compensation programs, less than 4%5% of the votes were cast against, and less than 1% abstained from voting.
The Compensation Committee 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 2015,2019, in part due to the significant majority of stockholders that voted to approve the Company's executive compensation programs at the 20142018 annual meeting of stockholders.
Previously,In addition, at the Company's 20112017 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%At that meeting, a majority of the votes on the matter were castour stockholders voted 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 Pay vote every three years,year, and accordingly, the next of which will occurCompany adopted an annual Say on Pay vote frequency. As described in more detail in Proposal No. 2 above, the Company is again holding an a Say on Pay vote to approve executive compensation at the Company's 20172019 annual meeting of stockholders.
| COMPENSATION COMMITTEE REPORT |
The Compensation Committee which was chaired by 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 20152018 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.statement and incorporated by reference into the Company's 2018 Annual Report on Form 10-K. This report is submitted by Donna R. Ecton, J. Mark Howell,Todd F. Bourell, 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 2015.Larson.
Compensation Committee
Donna R. Ecton(Chairman)Peter R. FormanekJ. Mark HowellTodd F. Bourell
Lynn Jolliffe
John P. Larson
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| 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 2015.2018.
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 between 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 TSR and Cumulative Operating 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%165% 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.intentional misconduct. 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 elements; 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.
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| SUMMARY COMPENSATION TABLE FOR |
The table below contains information concerning the compensation of (i) our (i) chief executive officer; (ii) our chief financial officer; and (iii) each of the three other most highly compensated executive officers who were serving as our executive officers as of December 31, 2015.2018.
| Name and Principal Position | Year | Salary | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jim Hallett, | 2015 | $900,000 | $2,856,908 | — | $1,023,613 | $43,420 | $4,823,941 | ||||||||
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CEO and Chairman | 2014 | $900,000 | $1,477,796 | $1,283,066 | $1,106,118 | $41,340 | $4,808,320 | ||||||||
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| 2013 | $832,320 | $4,407,271 | — | $711,164 | $43,399 | $5,994,154 | ||||||||
Eric Loughmiller, | 2015 | $450,000 | $1,322,651 | — | $383,855 | $37,456 | $2,193,962 | ||||||||
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EVP and CFO | 2014 | $442,534 | $738,898 | $641,546 | $407,913 | $32,026 | $2,262,917 | ||||||||
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| 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 | ||||||||
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Chief Operating | 2014 | $523,388 | — | — | $617,391 | $29,750 | $1,170,529 | ||||||||
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Officer | 2013 | $424,483 | — | — | $430,638 | $29,358 | $884,479 | ||||||||
Stéphane St-Hilaire,(5) | 2015 | $447,937 | $476,188 | — | $553,145 | $80,059 | $1,557,323 | ||||||||
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CEO and President | 2014 | $434,363 | $295,582 | $256,634 | $456,113 | $93,051 | $1,535,743 | ||||||||
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of ADESA | |||||||||||||||
John Kett,(6) | 2015 | $450,000 | $476,188 | — | $481,030 | $33,620 | $1,440,838 | ||||||||
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CEO and President | |||||||||||||||
of IAA |
Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jim Hallett | 2018 | $975,000 | | $3,900,032 | $1,219,046 | $44,148 | $6,138,226 | ||||||||
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Chief Executive Officer | 2017 | $900,000 | | $3,514,776 | $1,355,361 | $41,739 | $5,811,876 | ||||||||
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and Chairman of the Board | 2016 | $900,000 | | $3,040,091 | $1,094,772 | $43,220 | $5,078,083 | ||||||||
Eric Loughmiller | 2018 | $535,577 | $918,788 | $460,882 | $27,045 | $1,942,292 | |||||||||
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Executive Vice President | 2017 | $500,000 | $854,324 | $456,798 | $25,862 | $1,836,984 | |||||||||
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and Chief Financial Officer | 2016 | $450,000 | $1,310,398 | $410,540 | $46,780 | $2,217,718 | |||||||||
John Hammer | 2018 | $432,692 | $400,000 | $1,125,109 | $210,318 | $294,981 | $2,463,100 | ||||||||
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President of ADESA | |||||||||||||||
Don Gottwald | 2018 | $583,495 | $1,021,164 | $589,324 | $32,680 | $2,226,663 | |||||||||
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Chief Strategy Officer and | 2017 | $583,495 | $996,133 | $702,974 | $30,870 | $2,313,472 | |||||||||
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President of Digital, Data | 2016 | $566,500 | $742,354 | $689,098 | $32,454 | $2,030,406 | |||||||||
and Mobility Solutions(5) | |||||||||||||||
Becca Polak | 2018 | $515,000 | | $901,256 | $376,484 | $30,350 | $1,823,090 | ||||||||
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Chief Legal Officer and | 2017 | $475,000 | | $811,595 | $436,338 | $30,150 | $1,753,083 | ||||||||
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Secretary for KAR and | 2016 | $440,000 | | $461,284 | $401,416 | $33,990 | $1,336,690 | ||||||||
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President of TradeRev |
For Mr. St-Hilaire – $714,264; and Mr. Kett – $714,264.
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Compensation information for 2013 is not provided for Mr. St-Hilaire because he was not a named executive officer in that year.
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| GRANTS OF PLAN-BASED AWARDS FOR |
The following table summarizes the payouts which our named executive officers could or may have received upon the achievement of certain performance objectives under the Annual Incentive Program and the grants of PRSUs and RSUs made under the Omnibus Plan in 2015. We did not grant any option awards in 2015.
2018.
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name (a) | Grant Date (b) | Threshold ($)(c)(1) | Target ($)(d)(1) | Maximum ($)(e)(1) | Threshold (#)(f)(2) | Target (#)(g)(2) | Maximum (#)(h)(2) | Number of Securities Underlying Restricted Stock Units (#)(3)(i) | Grant Date Fair Value of Stock Awards ($)(4)(j) | | |||||||||||||||||
Jim Hallett | | — | | 609,375 | 1,218,750 | 1,828,125 | | | | | | | | | | | |||||||||||
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| | 3/2/2018 | | | | | | 27,029 | | 54,057 | | 108,114 | | | | 2,925,024 | |||||||||||
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| | 3/2/2018 | | | | | | | | | | | | 18,019 | | 975,008 | |||||||||||
Eric Loughmiller | — | 229,427 | 458,854(5) | 688,281 | |||||||||||||||||||||||
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| 3/2/2018 | 6,368 | 12,735 | 25,470 | 689,091 | |||||||||||||||||||||||
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| 3/2/2018 | 4,245 | 229,697 | |||||||||||||||||||||||||
John Hammer | | — | | 208,333 | 416,667(6) | 625,000 | | | | | | | | | | | |||||||||||
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| | 3/2/2018 | | | | | | 7,797 | | 15,594 | | 31,188 | | | | 843,791(7 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 3/2/2018 | | | | | | | | | | | | 5,199 | | 281,318(7 | ) | ||||||||||
Don Gottwald | — | 291,748 | 583,495 | 875,243 | |||||||||||||||||||||||
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| 3/2/2018 | 7,077 | 14,154 | 28,308 | 765,873 | |||||||||||||||||||||||
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| 3/2/2018 | 4,718 | 255,291 | |||||||||||||||||||||||||
Becca Polak | | — | | 193,125 | 386,250 | 579,375 | | | | | | | | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 3/2/2018 | | | | | | 6,246 | | 12,492 | | 24,984 | | | | 675,942 | |||||||||||
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| | 3/2/2018 | | | | | | | | | | | | 4,164 | | 225,314 | |||||||||||
| | | 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 | | | | | | | | | | | ||||||||||
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| | 2/20/2015 | | | | | | | | 28,940 | | 57,879 | | 115,758 | | | | 2,142,681 | ||||||||||
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| | 2/20/2015 | | | | | | | | | | | | | | 19,293 | | 714,227 | ||||||||||
Eric Loughmiller | — | 168,750 | 337,500 | 506,250 | ||||||||||||||||||||||||
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| 2/20/2015 | 13,398 | 26,796 | 53,592 | 991,988 | ||||||||||||||||||||||||
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| 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 | ||||||||||
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| | 2/20/2015 | | | | | | | | | | | | | | 4,913 | | 181,879 | ||||||||||
Stéphane St-Hilaire(5) | — | 225,000 | 450,000 | 675,000 | ||||||||||||||||||||||||
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| 2/20/2015 | 4,824 | 9,647 | 19,294 | 357,132 | ||||||||||||||||||||||||
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| 2/20/2015 | 3,216 | 119,056 | ||||||||||||||||||||||||||
John Kett | | — | | 225,000 | | 450,000 | | 675,000 | | | | | | | | | | | ||||||||||
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| | 2/20/2015 | | | | | | | | 4,824 | | 9,647 | | 19,294 | | | | 357,132 | ||||||||||
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| | 2/20/2015 | | | | | | | | | | | | | | 3,216 | | 119,056 | ||||||||||
Additional information concerning our cash and equity incentive awards and plans may be found in the sections titled "Compensation Discussion and Analysis—Elements Used to Achieve Compensation Philosophy and Objectives—Annual Cash Incentive Programs"Program" and "Long-Term Incentive Opportunities," respectively.
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| 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 ($) (j) | Number of Securities Underlying Unexercised Options Exercisable (#) (b) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Number of Shares or Units of Stock That Have Not Vested (#)(g) | Market Value of Shares or Units of Stock That Have Not Vested ($)(h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (j) | ||||||||||||||||||||||
Jim Hallett | 37,500 | | | 13.46 | 03/01/2020 | | | | 194,404 | | 30.89 | | 02/27/2024 | | | | | | | | | |||||||||||||||
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| 112,500 | | | 13.46 | 03/01/2020 | | | |||||||||||||||||||||||||||||
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| 48,601 | 145,803(1) | | 30.89 | 02/27/2024 | | | |||||||||||||||||||||||||||||
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| | | | | | 268,818(2) | 9,954,331(2) | |||||||||||||||||||||||||||||
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| | | | | | 43,832(3) | 1,623,099(3) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 43,832(4) | 1,623,099(4) | | | | | | | | 7,065(1 | ) | | 363,923(1 | ) | | 83,528(2 | ) | | 3,985,956(2 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 115,758(5) | 4,286,519(5) | | | | | | | | 12,634(3 | ) | | 634,142(3 | ) | | 125,104(4 | ) | | 5,969,963(4 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 19,293(6) | 714,420(6) | | | | | | | | 17,298(5 | ) | | 844,089(5 | ) | | 55,478(6 | ) | | 2,647,410(6 | ) | |||||||||||
Eric Loughmiller | 24,301 | 72,903(1) | 30.89 | 02/27/2024 | 97,204 | 30.89 | 02/27/2024 | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 134,410(2) | 4,977,202(2) | 3,144(1 | ) | 161,950(1 | ) | 36,004(2 | ) | 1,718,111(2 | ) | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 21,916(3) | 811,549(3) | 3,199(3 | ) | 160,568(3 | ) | 30,407(4 | ) | 1,451,022(4 | ) | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
| 21,916(4) | 811,549(4) | 4,245(5 | ) | 207,142(5 | ) | 13,069(6 | ) | 623,653(6 | ) | |||||||||||||||||||||||||||
John Hammer | | | | | | | | 5,199(5 | ) | | 253,695(5 | ) | | 16,004(6 | ) | | 763,711(6 | ) | ||||||||||||||||||
Don Gottwald | 1,781(1 | ) | 91,740(1 | ) | 20,396(2 | ) | 973,297(2 | ) | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 53,592(5) | 1,984,512(5) | 3,730(3 | ) | 187,221(3 | ) | 35,456(4 | ) | 1,691,960(4 | ) | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 8,932(6) | 330,752(6) | 4,718(5 | ) | 230,224(5 | ) | 14,526(6 | ) | 693,181(6 | ) | |||||||||||||||||||||||||||
Don Gottwald | 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 | | | |||||||||||||||||||||||||||||
Becca Polak | | 34,996 | | 30.89 | | 2/27/2024 | | | | | | | | | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 56,585 | | | 10.00 | 08/20/2017 | | | | | | | | | | 1,107(1 | ) | | 57,022(1 | ) | | 12,673(2 | ) | | 604,756(2 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 19,294(5) | 714,457(5) | | | | | | | | 3,039(3 | ) | | 152,537(3 | ) | | 28,886(4 | ) | | 1,378,440(4 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 3,216(6) | 119,088(6) | | | | | | | | 4,164(5 | ) | | 203,190(5 | ) | | 12,820(6 | ) | | 611,770(6 | ) | |||||||||||
| | | | | | | | | | | |
Name | Amount | |||||||||
| | | | | | | | | | | |
Jim Hallett | | $26,781 | | |||||||
| | | | | | | | | | | |
Eric Loughmiller | $11,918 | |||||||||
| | | | | | | | | | | |
| John Hammer | | N/A | | ||||||
| | | | | | | | | | | |
Don Gottwald | $6,751 | |||||||||
| | | | | | | | | | | |
| Becca Polak | | $4,196 | | ||||||
| | | | | | | | | | | |
| |
held by each named executive officer multiplied by the market price of Company common stock at the close of the last trading day in 2015,2018, which was $37.03$47.72 per share, including reinvested dividends on such PRSUs. Because the performance period for these PRSUs was completed as of the end of 2018, we have reported these PRSUs at the level actually earned.
| | |
| | |
| | 44 |
common stock at the close of the last trading day in 2018, which was $47.72 per share. The total amount in column (h) includes accrued and unpaid cash dividend equivalents in the following amounts:
| | | | | | | | | | | |
Name | Amount | |||||||||
| | | | | | | | | | | |
Jim Hallett | | $31,248 | | |||||||
| | | | | | | | | | | |
Eric Loughmiller | $7,912 | |||||||||
| | | | | | | | | | | |
| John Hammer | | N/A | | ||||||
| | | | | | | | | | | |
Don Gottwald | $9,225 | |||||||||
| | | | | | | | | | | |
| Becca Polak | | $7,516 | | ||||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Name | Amount | |||||||||
| | | | | | | | | | | |
Jim Hallett | | $18,628 | | |||||||
| | | | | | | | | | | |
Eric Loughmiller | $4,571 | |||||||||
| | | | | | | | | | | |
| John Hammer | | $5,599 | | ||||||
| | | | | | | | | | | |
Don Gottwald | $5,081 | |||||||||
| | | | | | | | | | | |
| Becca Polak | | $4,484 | | ||||||
| | | | | | | | | | | |
| | |
| | |
| | |
| OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR |
| | Option Awards | Stock Awards | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | Number of Shares Acquired on Vesting (#) (d) | Value Realized on Vesting ($) (e) | |||||||||
| Jim Hallett | | 150,000 | | 7,296,799 | | 104,257 (1) | | 5,370,077 (2) | |||||
| Eric Loughmiller | — | — | 46,729 (1) | 2,405,207 (2) | |||||||||
| John Hammer | | — | | — | | — | | — | |||||
| Don Gottwald | 60,000 | 2,860,369 | 26,738 (1) | 1,377,503 (2) | |||||||||
| Becca Polak | | 176,720 | | 8,231,664 | | 16,063 (1) | | 828,199 (2) | |||||
| | Option Awards | ||||||
|---|---|---|---|---|---|---|---|
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | |||||
Jim Hallett | | — | | — | |||
Eric Loughmiller | — | — | |||||
Don Gottwald | | 28,270 | | 780,414 | |||
Stéphane St-Hilaire | — | — | |||||
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" below.
| EQUITY-BASED AWARDS— |
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 plansOmnibus Plan 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
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 Omnibus Plan will be forfeited upon a termination of employment for any reason (except in the case of disability or death, as described in the Omnibus Plan). | | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Options | Voluntary Termination: vested options remain exercisable for 90 days (or until earlier expiration date). For Cause: all vested and unvested options are cancelled. | All vested options remain exercisable for one year (or until earlier expiration date). In the event of death or disability, all unvested options vest in full, with performance awards remaining subject to achievement of goals. | 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 substitute with successor company awards. | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | 47 |
| | | | | | | | | | | | | | | | | | | | | | | | | | ||||
| | 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 | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||
|
| |||||||||||||||||||||||||||
| |
| | | |||||||||||||||||||||||||
| |
| | Automatic forfeiture. | | Without Cause or for Good Death or Disability: Full vesting of the PRSU award based on the Company's actual performance during the performance period. Retirement: Prorated potion of the PRSUs based on the Company's actual performance during the performance period and the number of full months worked through the retirement date (including the "early retirement date" which is 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) plus a credit of an additional 12 months. | |
| | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | ||
2017 RSUs 2018 RSUs | Voluntary Termination (with or without Good Reason), Death or Disability: Full vesting of any unvested Retirement: Immediate vesting of any unvested RSUs scheduled to vest in the 12 months following the retirement date (including the "early retirement date") and a prorated portion of such RSUs based on the number of full months he/she was employed since the most recent anniversary of the grant date (after giving 12 months vesting credit following the date of retirement). | 2016 RSUs: Single trigger vesting. 2017/2018 RSUs: Double trigger vesting for any RSUs that are assumed or replaced in a Change in Control. Single trigger vesting | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | ||
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 hishis/her 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 hishis/her willful violation of any applicable law;law (other than certain exceptions set forth in the Omnibus Plan); (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;investigation of the Company or any subsidiary; 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 anya subsidiary or not to compete or interfere with the Company or anya 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.
| | |
| | |
| | |
| ANNUAL CASH INCENTIVE AWARDS—OMNIBUS PLAN |
| | | | | | | | | | | | | | | | | | | | | |
| Termination or Change in Control Scenario | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 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 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| | Death, Disability, Voluntary Termination (with or without Good Reason) or Termination by the Company (for Cause or without Cause): Annual cash incentive awards are treated as described in the executive's employment agreement with the Company, to the extent applicable. See "Employment Agreements with Named Executive Officers" Retirement: Unless otherwise specified in an employment agreement, an executive receives | | Unless otherwise determined by the administrator of the Omnibus Plan or as evidenced in an award agreement, pro rata payment based on actual performance, in the administrator's discretion. | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN |
The amounts in the table below assume that the termination and/or change in control, as applicable, was effective as of December 31, 2015,2018, 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 table is merely an illustrative example 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 | —(9) | $1,219,046 | — | $9,618,430 | $1,842,154 | — | $800,000 | $13,479,630 | ||||||||||
| • | Disability(7) | —(9) | $1,219,046 | — | $9,618,430 | $1,842,154 | — | — | $12,679,630 | ||||||||||
| • | Retirement(8) | — | $1,219,046 | — | $8,735,946 | $1,455,220 | — | — | $11,410,212 | ||||||||||
| • | Voluntary / for Cause | — | — | — | — | — | — | — | — | ||||||||||
| • | Termination w/o Cause or for Good Reason | $4,387,500(10) | $1,219,046 | — | $6,858,469 | — | — | — | $12,465,015 | ||||||||||
| • | CIC (single trigger) | — | $1,219,046 | — | $3,403,926 | $363,923 | — | — | $4,986,895 | ||||||||||
| • | Termination after CIC (double trigger) | $4,387,500(10) | $1,219,046 | — | $9,036,359 | $1,842,154 | — | — | $16,485,059 | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Eric Loughmiller | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| • | Death | $16,727(9) | $460,882 | — | $3,067,341 | $529,660 | — | $800,000 | $4,874,610 | ||||||||||
| • | Disability(7) | $16,727(9) | $460,882 | — | $3,067,341 | $529,660 | — | — | $4,074,610 | ||||||||||
| • | Retirement(8) | — | — | — | — | — | — | — | — | ||||||||||
| • | Voluntary / for Cause | — | — | — | — | — | — | — | — | ||||||||||
| • | Termination w/o Cause or for Good Reason | $1,116,727(10) | $460,882 | — | $2,409,699 | — | — | — | $3,987,308 | ||||||||||
| • | CIC (single trigger) | — | $460,882 | — | $1,467,218 | $161,950 | — | — | $2,090,050 | ||||||||||
| • | Termination after CIC (double trigger) | $1,116,727(10) | $460,882 | — | $2,816,447 | $529,660 | — | — | $4,923,716 | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
| John Hammer | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| • | Death | $26,971(9) | $210,318 | — | $763,719 | $253,695 | — | $800,000 | $2,054,703 | ||||||||||
| • | Disability(7) | $26,971(9) | $210,318 | — | $763,719 | $253,695 | — | — | $1,254,703 | ||||||||||
| • | Retirement(8) | — | — | — | — | — | — | — | — | ||||||||||
| • | Voluntary / for Cause | — | — | — | — | — | — | — | — | ||||||||||
| • | Termination w/o Cause or for Good Reason | $1,026,971(10) | $210,318 | — | $254,573 | — | — | — | $1,491,862 | ||||||||||
| • | CIC (single trigger) | — | $210,318 | — | — | — | — | — | $210,318 | ||||||||||
| • | Termination after CIC (double trigger) | $1,026,971(10) | $210,318 | — | $763,719 | $253,695 | — | — | $2,254,703 | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Don Gottwald | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| • | Death | $23,844(9) | $589,324 | — | $2,512,506 | $509,185 | — | $800,000 | $4,434,859 | ||||||||||
| • | Disability(7) | $23,844(9) | $589,324 | — | $2,512,506 | $509,185 | — | — | $3,634,859 | ||||||||||
| • | Retirement(8) | — | — | — | — | — | — | — | — | ||||||||||
| • | Voluntary / for Cause | — | — | — | — | — | — | — | — | ||||||||||
| • | Termination w/o Cause or for Good Reason | $1,190,834(10) | $589,324 | — | $1,768,379 | — | — | — | $3,548,537 | ||||||||||
| • | CIC (single trigger) | — | $589,324 | — | $831,188 | $91,740 | — | — | $1,512,252 | ||||||||||
| • | Termination after CIC (double trigger) | $1,190,834(10) | $589,324 | — | $2,370,373 | $509,185 | — | — | $4,659,716 | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Becca Polak | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| • | Death | $26,805(9) | $376,484 | — | $1,905,821 | $412,749 | — | $800,000 | $3,521,859 | ||||||||||
| • | Disability(7) | $26,805(9) | $376,484 | — | $1,905,821 | $412,749 | — | — | $2,721,859 | ||||||||||
| • | Retirement(8) | — | — | — | — | — | — | — | — | ||||||||||
| • | Voluntary / for Cause | — | — | — | — | — | — | — | — | ||||||||||
| • | Termination w/o Cause or for Good Reason | $928,055(10) | $376,484 | — | $1,268,209 | — | — | — | $2,572,748 | ||||||||||
| • | CIC (single trigger) | — | $376,484 | — | $516,466 | $57,022 | — | — | $949,972 | ||||||||||
| • | Termination after CIC (double trigger) | $928,055(10) | $376,484 | — | $1,817,505 | $412,749 | — | — | $3,534,793 | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| 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 | |||||||||||
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Don Gottwald | | | | | | | | | |||||||||||||||||
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• 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 | ||||||||||||
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Stéphane St-Hilaire | | | | | | | | | |||||||||||||||||
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• 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 | |||||||||||
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John Kett | | | | | | | | | |||||||||||||||||
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• 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 | ||||||||||||
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Footnotes to Potential Payments Upon Termination or Change in Control Table
If a Change in Control occurs prior to the termination of such officer's employment, assuming a Change in Control date of December 31, 2015, he2018, he/she would be entitled to receive immediate vesting and payout of the unvested portiontarget number of his 2015 RSU award2016 PRSUs, without proration. If such officer's employment is terminated following a Change in Control as a result of a termination without Cause or a resignation for Good Reason, assuming a Change in Control date of December 31, 2018, he/she would be entitled to receive immediate vesting of the target number of 2017 PRSUs and 2018 PRSUs as of his/her termination date, without proration, with respect to any 2017 PRSUs or 2018 PRSUs that are assumed or replaced in the Change in Control (or, in the case of a termination without Cause effective as of the Change in Control.
If a Change in Control occurs prior to the termination of such officer's employment, assuming a Change in Control date of December 31, 2018, he/she would be entitled to receive immediate vesting of the unvested portion of his/her 2016 RSU award and any 2017 and 2018 RSU awards that are not assigningassumed or replaced in the Change in Control, each, as of the Change in Control date. If such officer's employment is terminated following a Change in Control as a result of a termination without Cause or a resignation for Good Reason, assuming a Change in Control date of December 31, 2018, he/she would be entitled to receive immediate vesting of any 2017 and 2018 RSU awards that is assumed or replaced in the Change in Control, as of his/her termination date. With respect to a Change in Control, the amounts disclosed in the "CIC (single trigger)" rows in the table assume that the 2017 and 2018 RSUs are assumed or replaced in the Change in Control.
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Messrs. Loughmiller, St-HilaireHammer and KettGottwald and Ms. Polak had not satisfied the Retirement requirements under the Omnibus Plan and the applicable award agreements as of December 31, 20152018 (i.e., none had reached the age of 65)60 and met the applicable age and service requirements), and thus, they would not have been entitled to a prorated payout of their annual bonuses or accelerated vesting of their equity for a Retirement as of such date.
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| 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
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"Cause. "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.
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"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 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 of the Code, 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.
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, Hammer and Gottwald St-Hilaire and Kett,Ms. Polak, providing for their at-will employment and the following severance and change of control payments.
Termination Due to Death or Disability. If Messrs. Loughmiller, Hammer or Gottwald St-Hilaire or KettMs. Polak terminates hishis/her employment due to death or disability, the Company will be obligated to pay to the executive (or hishis/her 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 hishis/her 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
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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 hishis/her 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, Hammer or Gottwald St-Hilaire or KettMs. Polak voluntarily terminates hishis/her employment or if the Company terminates hishis/her employment for Cause, the Company's sole obligation will be to pay himhim/her 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, Hammer or Gottwald St-Hilaire or KettMs. Polak is terminated by the Company without Cause or such executive resigns for Good Reason, the executive would be entitled to receive, subject to the execution and non-revocation of a release of claims, (i) a lump sum cash payment equal to the sum of hishis/her 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 made in connection with across the board salary reductions; (iv) the requirement by the Company that the executive relocate hishis/her 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, Hammer and Gottwald St-Hilaire and KettMs. Polak 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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| CEO PAY RATIO |
Summary: For the 2018 fiscal year, the ratio of the annual total compensation of Mr. Hallett, our Chief Executive Officer ("CEO Compensation"), to the median of the annual total compensation of all of our employees and those of our consolidated subsidiaries other than Mr. Hallett ("Median Annual Compensation") was 173 to 1.
This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described below. The assumptions used in the calculation of our estimated pay ratio are specific to our company and our employee population; therefore, our pay ratio may not be comparable to the pay ratios of other companies, including the companies in our proxy comparator group.
In this summary, we refer to the employee who received the Median Annual Compensation as the "Median Employee." For purposes of this summary, Median Annual Compensation was $35,420, and was calculated by totaling for our Median Employee all applicable elements of compensation for the 2018 fiscal year in accordance with Item 402(c)(2)(x) of Regulation S-K. For purposes of this summary, CEO Compensation was $6,138,226. CEO Compensation for purposes of this disclosure represents the total compensation reported for Mr. Hallett in the "Summary Compensation Table for 2018" for the 2018 fiscal year.
Methodology: As permitted by SEC rules, the Median Employee identified in 2017 was utilized as the Median Employee for 2018 as the Company did not experience changes in employee population or compensation arrangements that we reasonably believe would result in a significant change to this pay ratio disclosure. In 2017, to identify the Median Employee, we first determined our employee population as of December 31, 2017 (the "Determination Date"). We had 17,481 employees (other than Mr. Hallett), representing all full-time, part-time, seasonal and temporary employees of us and our consolidated subsidiaries as of the Determination Date. This number did not include any independent contractors or "leased" workers, as permitted by the applicable SEC rules. Of our 17,481 total employees (other than Mr. Hallett), approximately 231 (or about 1%) were employed in the United Kingdom and approximately 9 (or less than 1%) were employed in Mexico. We chose to exclude these 240 employees based outside of the U.S. in identifying our Median Employee, as permitted under thede minimis exemption to Item 402(u) of Regulation S-K. We used our number of total employees (17,481, other than Mr. Hallett) in making ourde minimis calculation.
We then measured compensation for the period beginning on January 1, 2017 and ending on December 31, 2017 for 17,241 employees (after the permitted exclusions noted above). This compensation measurement was calculated by totaling, for each employee, gross wages reported on Form W-2 (or its equivalent for non-U.S. employees), which included cash compensation, including regular pay (wages and salary), all variants of overtime (if eligible), and all variants of bonus payments actually paid (if any). In determining the Median Employee, we annualized the total compensation for the portion of our permanent employee workforce (full-time and part-time) which worked for less than the full fiscal year due to commencing employment after the beginning of the fiscal year.
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| RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: PROPOSAL NO. 3 |
| PROPOSAL |
The Audit Committee has appointed KPMG LLP ("KPMG") to serve as the Company's independent registered public accounting firm for its fiscal year ending December 31, 2019. The Audit Committee and the Board seek to have the stockholders ratify the Audit Committee's appointment of KPMG, which has served as the Company's independent registered public accounting firm since 2007. Although the Company is not required to seek stockholder approval of this appointment, the Board 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 2019 annual meeting.
Representatives of KPMG will be present at the 2019 annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
| ✓ | The Board of Directors recommends that you vote "FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm for 2019. | |
| Proxies solicited by the Board of Directors will be voted "FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm for 2019 unless stockholders specify a contrary vote. |
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| REPORT OF THE AUDIT COMMITTEE |
The Audit Committee is comprised of four independent directors, each of whom satisfies the independence requirements of Section 10A of the Exchange Act and Rule 10A-3 under the Exchange Act. The Audit Committee oversees our financial reporting process on behalf of the Board and serves as the primary communication link between the Board as the representative of our stockholders, KPMG as our independent auditor, and our internal auditors. Our management has the primary responsibility for our financial statements and the reporting process, including the systems of internal controls and for assessing the effectiveness of internal controls over financial reporting. The Audit Committee, at least quarterly, meets with the Company's Chief Financial Officer, the Company's Vice President of Internal Audit and representatives of KPMG and conducts separate executive sessions to discuss the audited consolidated 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 and discussed 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, 2018. 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. 1301,Communications with Audit Committees. The Audit Committee received the written disclosures and the letter 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, 2018 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 2018. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
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. To assist in the evaluation of KPMG's performance for the 2018 audit, the Audit Committee conducted a comprehensive evaluation, which included obtaining input from certain members of management, assessing KPMG's independence, technical expertise, industry knowledge, adequacy of audit approach and scope, appropriateness of fees, and service and communication with management and the Audit Committee. The results of this evaluation were discussed with the KPMG engagement partner and the managing partner of KPMG's local office. 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 controls over financial reporting, the quality of our financial reporting and the ability of the independent auditors to remain independent. Based on these evaluations, the Audit Committee approved the engagement of KPMG as our independent auditors for fiscal year 2019.
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Although the Audit Committee has the sole authority to appoint the independent auditors, the Audit 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. This report is submitted by Michael T. Kestner, Donna R. Ecton, J. Mark Howell and Stephen E. Smith.
The Audit Committee
Michael T. Kestner(Chairman)
Donna R. Ecton
J. Mark Howell
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 2018 and 2017 and for other services rendered during 2018 and 2017 to KAR Auction Services and its subsidiaries, as well as all out-of-pocket costs incurred in connection with these services:
Fee Category | 2018 | 2017 | |||||
|---|---|---|---|---|---|---|---|
Audit Fees(1) | $ | 2,496,449 | $ | 2,880,000 | |||
Audit-Related Fees(2) | 3,098,162 | 416,116 | |||||
Tax Fees(3) | | 98,526 | | 148,239 | |||
All Other Fees(4) | 1,905 | 1,780 | |||||
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Total Fees | $ | 5,695,042 | $ | 3,446,135 | |||
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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 fees, audit-related fees, tax fees and all other fees described above were approved by the Audit Committee or the Chairman of the Audit Committee before such services were rendered.
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| CERTAIN RELATED PARTY RELATIONSHIPS |
| REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS |
Pursuant to our written related party transactions 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 2015.2018.
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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 inclusion in our proxy statement related to the 20172020 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 executive office in Carmel, Indiana no later than December 29, 2016.26, 2019.
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 CounselChief Legal Officer and Secretary, KAR Auction Services, Inc., 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032. As the SEC's shareholder proposal rules 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 pursuant to SEC Rule 14a-8, but that a stockholder instead wishes to present directly at an annual meeting. To be properly brought before the 20162020 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 address 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 8, 2017,5, 2020, and no later than March 10, 2017.6, 2020. 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.Company by writing to KAR Auction Services, Inc., Secretary, 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032.
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 2019 annual meeting. IfHowever, 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 2019 annual meeting. If for any unforeseen reason, any one or more of KAR Auction Services'the Board's nominees is not available to stand for election 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 as a substitute by the Board of Directors.Board.
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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| QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING |
| Q: | Why am I receiving these materials? | |
| A: | We are providing these proxy materials to you in connection with the solicitation, by the Board of | |
Q: | What proposals will be voted on, |
| A: |
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Board Recommendation | Voting Standard | Effect of Abstention | Effect of Broker Non-Vote | |||||||||
• Vote "FOR" all nominees | More votes | No effect | No effect | |||||||||
| Directors | • Vote "FOR" specific nominees | "FOR" than | ||||||||||
• Vote "AGAINST" all nominees | "AGAINST" | |||||||||||
• Vote "AGAINST" specific nominees | ||||||||||||
• Abstain from voting for all nominees | ||||||||||||
• Abstain from voting for specific nominees | ||||||||||||
The Board recommends a vote "FOR" each of the | ||||||||||||
| | 2. | Advisory Vote | • Vote "FOR" the advisory proposal | Majority of the | Vote against | No effect | ||||||
| | | to Approve | •
| shares present | ||||||||
| | | Executive | • Abstain from voting on the | and | ||||||||
| | | Compensation | proposal | vote | ||||||||
| | The Board recommends a vote "FOR" the advisory vote to approve executive compensation. | ||||||||||
| 3. | Ratification of | • Vote "FOR" the ratification | Majority of the | Vote against | Not | |||||||
| Independent | • Vote "AGAINST" the ratification | shares present | applicable | |||||||||
| Registered Accounting Firm | • Abstain from voting on the ratification | and entitled to vote | ||||||||||
The Board recommends a vote " the ratification of the appointment of KPMG as our independent registered accounting firm for | ||||||||||||
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| Q: | Who is entitled to vote? | |
| A: | All shares owned by you as of the record date, which is the close of business on April | |
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 Auction Services, Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"). | ||
On the record date, KAR Auction Services had | ||
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| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? | |
| A: | 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 a "stockholder of record" with respect to those | |
Beneficial Owner. If your shares are held in a brokerage account or by a bank or other nominee, you | ||
| Q: | How can I vote my shares | |
| A: | Stockholders may participate in the 2019 annual meeting by visiting the following website:www.virtualshareholdermeeting.com/KAR2019. To participate in the 2019 annual meeting, you will need the 16-digit control number provided on your Notice, on your proxy card, or on the instructions that accompanied your proxy materials. | |
Stockholder of Record. Shares held directly in your name as the stockholder of record may be voted | ||
Beneficial Owner. If you are a beneficial owner in street name and want to vote your shares online during the 2019 annual meeting, you will need to ask your bank, broker or other nominee to furnish you with a legal proxy and proof of | ||
Even if you plan to attend the 2019 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 2019 annual meeting. See "How can I vote my shares without attending the 2019 annual meeting?" below. | ||
The 2019 annual meeting will begin promptly at 9:00 a.m., Eastern Daylight Time. We encourage you to access the meeting prior to the start time. Please allow ample time for online check-in, which will begin at 8:45 a.m. Eastern Daylight Time. |
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| We are holding the 2019 annual meeting online and providing Internet voting to provide expanded access and to allow you to vote your shares online during the annual meeting, with procedures designed to ensure the authenticity and correctness of your voting instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies. | ||
| Q: | How can I vote my shares without attending the 2019 annual meeting? | |
| A: | Whether you hold your shares directly as the stockholder of record or beneficially in street name, you may
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By Internet. Go towww.proxyvote.com and follow the instructions. You will need the control number included on your proxy card or voting instruction form;
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By Telephone. Dial 1-800-690-6903. You will need the control number included on your proxy card or voting instruction form; or
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By 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 | ||
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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 2019 annual meeting? | |
| A: | A quorum of stockholders is necessary to hold the 2019 annual meeting. A quorum at the 2019 annual meeting exists if the holders of a majority of the Company's capital stock issued and outstanding and entitled to vote at the 2019 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 on an item when a broker, | |
| owner of the shares and no instruction is given. | ||
| 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 | |
Beneficial |
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| The ratification of the appointment of KPMG as our independent registered public accounting firm for | |
• Non-Routine Matters.The election of directors (Proposal No. 1) and the | ||
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| Q: | ||
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| 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 | |
| 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 2019 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 2019 annual meeting online and voting | ||
Please note that your attendance at the 2019 annual meeting | ||
| Q: | Who will bear the cost of soliciting | |
| A: | The | |
| Q: | Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials? | |
| A: | This year, we are again taking advantage of the SEC rules that allow us to furnish our proxy materials over the Internet. As a result, most of our stockholders will be mailed a Notice of Internet Availability of Proxy Materials ("Notice"), rather than a full paper set of the proxy materials. The Notice includes information on how to access the proxy materials via the Internet as well as how to vote via the Internet. We believe this method of delivery will decrease printing and shipping costs, expedite distribution of proxy materials to you, and reduce our impact on the environment. Stockholders who receive the 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. |
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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: |
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If you | ||
| other nominee to request information about householding. | ||
| 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, | |
| Q: | Where can I find the voting results of the 2019 annual meeting? | |
| A: | KAR Auction Services will announce preliminary voting results at the 2019 annual meeting and publish preliminary, or final results if available, in a Current Report on Form 8-K within four business days of the 2019 annual meeting. |
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ANNEX I
AMENDED AND RESTATEDCERTIFICATE 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.
| A: | The 2019 annual meeting will be a completely virtual meeting of stockholders, which will be conducted through a live audio webcast. There will be no physical meeting location. You are entitled to participate in the annual meeting only if you were a Company stockholder as of the close of business on April 11, 2019 or if you hold a valid proxy for the annual meeting. | |||||
You will be able to attend the 2019 annual meeting online and submit your questions during the meeting by visitingwww.virtualshareholdermeeting.com/KAR2019. You also will be able to vote your shares online during the annual meeting. | ||||||
To participate in the 2019 annual meeting, you will need the 16-digit control number included on your Notice, on your proxy card, or on the instructions that accompanied your proxy materials. Instructions on how to attend and participate in our online meeting, including how to demonstrate proof of stock ownership, are posted on the meeting website. | ||||||
The meeting will begin promptly at 9:00 a.m., Eastern Daylight Time. We encourage you to access the meeting prior to the start time. Online access to the meeting will open at 8:45 a.m., Eastern Daylight Time, and you should allow ample time to log in to the meeting and test your device's audio capabilities prior to the start of the meeting. | ||||||
The webcast will be available for replay until midnight on June 3, 2020. | ||||||
| Q: | Why is the 2019 annual meeting virtual? | |||||
| A: | As in 2018, we are excited to host a virtual annual meeting to provide ease of access, real-time communication and cost savings for our stockholders and the Company. Hosting a virtual meeting facilitates stockholder attendance and participation by enabling stockholders to participate from around the world. In addition, hosting a virtual meeting provides improved communication and cost savings for our stockholders and the Company. | |||||
will remain available throughout the meeting. | ||||||
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*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 08, 20164, 2019. KAR AUCTION SERVICES, INC Date: June 08, 2016 Time: 9:00 AM EDT 50 West Washington StreetINC. XXXX XXXX XXXX XXXX (located on the following page). KAR AUCTION SERVICES, INC. 13085 HAMILTON CROSSING BLVD. CARMEL, IN 46032 You are receiving this communication because you hold shares in the abovecompany named company.above. 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 #proxy materials and voting instructions. E77278-P21192 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, 201611, 2019 Date: June 4, 2019 Time: 9:00 AM EDT Location: Meeting live via the Internet-please visit www.virtualshareholdermeeting.com/KAR2019. The Conrad Indianapolis Indianapolis, Indiana 46204 B A R C O D Ecompany will be hosting the meeting live via the Internet this year. To attend the meeting via the Internet please visit www.virtualshareholdermeeting.com/KAR2019 and be sure to have the information that is printed in the box marked by the arrow
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 XXXX XXXX XXXX XXXX (located on the by the arrow XXXX XXXX XXXX XXXX (located on the following page) in the subject line. How To Vote Please Choose One of the Following Voting Methods marked byXXXX XXXX XXXX XXXX (located on the arrowfollowing page) 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 byarrow XXXX XXXX XXXX XXXX (located on the entity holdingfollowing page) available and follow 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.instructions. E77279-P21192 Vote By Internet: To vote now by Internet, goBefore The Meeting: Go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow During The Meeting: Go to www.virtualshareholdermeeting.com/KAR2019. Have the information that is printed in the box marked by 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 DocumentProxy Materials Available to VIEW or RECEIVE: NOTICE AND PROXY STATEMENTFORM 10-K 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, 201621, 2019 to facilitate timely delivery.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" PROPOSALS 2 andAND 3. 1. Election of Directors Nominees Todd F. BourellNominees: 2. To approve, on an advisory basis, executive compensation. 1a. Donna R. Ecton 1b. James P. Hallett 3. 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 1D2019. 1c. Mark E. Hill 1ENOTE: Such other business as may properly come before the meeting or any adjournment thereof. 1d. J. Mark Howell 1F1e. Stefan Jacoby 1f. Lynn Jolliffe 1G1g. Michael T. Kestner 1H1h. John P. Larson 1I1i. 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 12345678901E77280-P21192 Voting itemsItems
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 InformationE77281-P21192
IfVOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. EDT the day before the cut-off date or meeting date. Have your proxy card in hand when you would likeaccess the web site and follow the instructions to reduceobtain your records and to create an electronic voting instruction form. KAR AUCTION SERVICES, INC. 13085 HAMILTON CROSSING BLVD. CARMEL, IN 46032 During The Meeting - Go to www.virtualshareholdermeeting.com/KAR2019 You may attend the costs incurredmeeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by our companythe arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. EDT the day before the cut-off date or meeting date. Have your proxy card in mailing proxy 1234567hand when you call and then follow the instructions. VOTE BY MAIL 123,456,789,012.12345Mark, 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. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E77267-P21192 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KAR AUCTION SERVICES, INC. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" PROPOSALS 2 andAND 3. 1. Election of Directors Nominees Todd F. BourellNominees: 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! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1a. Donna R. Ecton 1I Stephen E. Smith 1C1b. James P. Hallett 1DFor Against Abstain ! ! ! ! ! ! 1c. 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. 1Eon an advisory basis, executive compensation. 1d. 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. 1H2019. 1e. Stefan Jacoby 1f. Lynn Jolliffe 1g. Michael T. Kestner 1h. John P. Larson 1i. Stephen E. Smith For address change/changes and/or comments, mark here. (see reverse for instructions) Please indicate if you plan to attendplease check this meetingbox and write them on the back where indicated. 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
ANNUAL MEETING 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 DELIVERYSTOCKHOLDERS 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 LineJUNE 4, Investor Address Line 5 8 8 8 1 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 234567 234567 234567 234567
2019 Important Notice Regarding Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com Please sign, date and mail Your proxy card in the envelope provided as soon as possible E77268-P21192 PROXY KAR AUCTION SERVICES, INC. ANNUAL MEETING OF STOCKHOLDERS - JUNE 8, 20164, 2019 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, 2016,11, 2019, during or at any adjournment or postponement of the Annual Meeting of Stockholders to be held at 9:00 a.m., EDT, via the Inter net at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204 on Wednesday, June 8, 2016.www.virtualshareholdermeeting.com/KAR2019. 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 Changes/Comments above, please mark corresponding box on the reverse side.) Continued(Continued and to be signed on reverse side 0000283476_2 R1.0.1.25side) Address Changes/Comments:
