|
REPORT OF THE AUDIT COMMITTEE
|
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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31
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Table of Contents
Committee
has continued its long-standing practice of recommending that the Board ask our stockholders to ratify the appointment of the independent auditors at our annual meeting of stockholders.
The Audit Committee
Michael T. Kestner
(Chairman)
Donna R. Ecton
Lynn Jolliffe
Stephen 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:
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Fee Category
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|
2015
|
|
2014
|
|
Audit Fees(1)
|
|
|
$2,359,561
|
|
|
$2,148,000
|
|
Audit-Related Fees(2)
|
|
|
33,000
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|
|
32,500
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Tax Fees(3)
|
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248,615
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96,035
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All Other Fees(4)
|
|
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160,432
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70,471
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|
|
|
|
|
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|
Total Fees
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|
$2,801,608
|
|
|
$2,347,006
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-
(1)
-
Audit Fees:
Consists of fees for professional services rendered for the audit of our consolidated financial
statements, review of the interim condensed consolidated financial statements included in the Company's quarterly reports, the audit of our internal control over financial reporting and services that
are normally provided by independent registered public accounting firms in connection with statutory and regulatory filings or engagements, and attest services, except those not required by statute or
regulation.
-
(2)
-
Audit-Related Fees:
Consists principally of professional services rendered in connection with the audit of
our 401(k) benefit plan. Also includes professional services rendered with respect to our registration statement filed on Form S-8 and with respect to AFC's consolidating report.
-
(3)
-
Tax Fees:
Consists of fees for various tax planning projects.
-
(4)
-
All Other Fees:
Consists principally of fees for professional services rendered with respect to SOC 1
readiness assessments and reporting. Also includes a license to use KPMG's accounting research software.
|
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND
PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
KAR
Auction Services' independent registered public accounting firm fee pre-approval policy provides for an annual process through which the Audit Committee evaluates the
nature and scope of the audit prior to the commencement of the audit. The Audit Committee also evaluates audit-related, tax and other services that are proposed, along with the anticipated cost of
such services. The Audit Committee reviews schedules of specific services to be provided. If other services are provided outside of this annual process, under the policy they may be
(i) pre-approved by the Audit Committee at a regularly scheduled meeting; or (ii) pre-approved by the Chairman of the Audit Committee, acting between meetings and reporting back to the
Audit Committee at the next scheduled meeting. All audit, audit-related, tax services and all other fees described above were approved by the Audit Committee or the Chairman of the Audit Committee
before such services were rendered.
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32
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Table of Contents
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COMPENSATION DISCUSSION AND ANALYSIS
|
The
following discussion and analysis of our compensation program for named executive officers should be read in conjunction with the tables and text elsewhere in this proxy
statement that describe the compensation awarded and paid to the named executive officers.
Named Executive Officers
Our
named executive officers for the last completed fiscal year were (i) our chief executive officer; (ii) our chief financial officer; and (iii) each of the three other most
highly compensated executive officers who were serving as executive officers at the end of the last completed fiscal year. Our named executive officers are:
Jim Hallett
, Chief Executive Officer and Chairman of the Board of KAR Auction Services;
Eric Loughmiller
, Executive Vice President and Chief Financial Officer of KAR Auction Services;
Don Gottwald
, Chief Operating Officer of KAR Auction Services;
Stéphane St-Hilaire
, Chief Executive Officer and President of ADESA; and
John Kett
, Chief Executive Officer and President of IAA.
This CD&A is organized into the following six
sections:
Executive Summary (page 34)
Compensation Philosophy and Objectives (page 38)
The Role of the Compensation Committee and the Executive Officers in Determining Executive Compensation (page 38)
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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Table of Contents
Business Highlights
For the year ended December 31, 2015, KAR Auction Services again delivered solid growth in volume of total vehicles sold, revenues, adjusted EBITDA and adjusted net
income. Specific highlights for fiscal 2015 included:
-
·
-
Total vehicles sold by our ADESA and
IAA business segments rose approximately 13% to 4.4 million units.
-
·
-
Net revenue was up 12% to
approximately $2.6 billion.
-
·
-
Adjusted EBITDA* rose 9% to
approximately $650 million.
-
*
-
Adjusted
EBITDA is a non-GAAP measure and is defined and reconciled to the most comparable GAAP measure, net income (loss), in our Annual Report on
Form 10-K for the year ended December 31, 2015 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of OperationsEBITDA and Adjusted
EBITDA."
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34
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Table of Contents
-
·
-
Net income increased 27% from
$169.3 million ($1.19 per diluted share) to $214.6 million ($1.51 per diluted share).
-
·
-
Through share buybacks and dividends,
in 2015 we returned approximately $380 million to stockholders and invested approximately $253 million in our business through capital expenditures and strategic
acquisitions.
-
·
-
The closing stock price of KAR's
common stock rose approximately 7% from $34.65 at December 31, 2014 to $37.03 at December 31, 2015. The closing price shown below for each year is the closing price of a share of the
Company's common stock on December 31.
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35
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Table of Contents
We maintain a compensation program structured to achieve a close connection between executive pay and company performance. We believe that this strong pay-for-performance
orientation has served us well in recent years, particularly as we've moved forward following the sale by our former equity sponsors of all of their holdings of our common stock in late
2013.
WE DO:
-
ü
-
Pay for
performance alignment:
Historically, we have demonstrated close alignment between our total stockholder return (TSR) performance and the
compensation of our Chief Executive Officer, as shown in the chart below.
5-year Pay Alignment Chart
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Fiscal Year
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2010 YE
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2011
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2012
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2013
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2014
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2015
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CEO Pay ($000)
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$1,475
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$1,414
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$5,994
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$4,808
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$4,824
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Indexed TSR
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100
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97.83
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148.15
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223.66
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270.86
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|
297.96
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-
ü
-
Independent Compensation Committee:
All of the members of our Compensation Committee
are independent under NYSE rules.
-
ü
-
Independent compensation consultant:
In 2015, our Compensation Committee engaged
Semler Brossy as its independent compensation consultant.
-
ü
-
Pay for
performance:
The equity awards granted to our named executive officers in 2015 and in 2016 are heavily performance-based, including
restricted stock units that vest based on achievement of adjusted earnings per share and net income goals.
-
ü
-
Maximum
payout caps for annual cash incentive compensation and PRSUs.
-
ü
-
Clawback of
certain compensation if restatement and intentional misconduct:
Our clawback policy provides for the recovery of incentive compensation
in the event we are required to prepare an accounting restatement due to such executive officer's intentional misconduct.
-
ü
-
Moderate
change-in-control benefits:
Change-in-control severance benefits are two times base salary and target bonus for the CEO and one times
base salary and target bonus for the other executive officers.
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36
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Table of Contents
-
ü
-
Robust
equity ownership requirements:
In 2015, we adopted stock ownership guidelines that are applicable to senior executives, including our
named executive officers. The stock ownership guideline for our CEO is five times his annual base salary.
-
ü
-
Robust
equity retention requirement:
In 2015, we adopted an equity retention requirement that is applicable to senior executives, including our
named executive officers. Our named executive officers are required to hold 100% of net shares of Company stock received under awards granted on or after January 1, 2015 for at least
12 months after vesting, regardless of whether the stock ownership guideline has been met.
WE DO NOT:
-
✘
-
Allow dividends or dividend equivalents to be paid on unvested PRSUs:
Dividend
equivalents are accrued but not paid on PRSUs until (i) the performance conditions are satisfied; and (ii) the PRSUs vest after the performance measurement period.
-
✘
-
Allow hedging of KAR securities:
We prohibit the hedging of Company stock by
our directors and officers.
-
✘
-
Allow pledging of KAR securities:
As part of our Insider Trading Policy, we
prohibit the pledging of Company stock.
-
✘
-
Provide excessive executive perquisites.
We provide only a limited number of
perquisites to attract talented executives and to retain our current executives.
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37
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Table of Contents
|
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:
-
-
align the interests of our executive officers with the interests of our stockholders so that our executive officers manage from the
perspective of owners with an equity stake in the Company;
-
-
motivate and focus our executive officers through incentive compensation programs directly tied to our financial results;
-
-
support a one-company culture and encourage synergies among all business units by aligning rewards with long-term, overall Company
performance and stockholder value;
-
-
provide a significant percentage of total compensation through variable pay based on pre-established, measurable goals and objectives;
-
-
provide competitive upside opportunity without encouraging excessive risk-taking;
-
-
enhance our ability to attract and retain skilled and experienced executive officers; and
-
-
provide rewards commensurate with performance and with competitive market practices.
|
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. Howell and Larson.
Role of the Compensation Committee.
The Compensation Committee has primary responsibility for all compensation decisions relating to our named executive officers.
The Compensation Committee reviews the aggregate level of our executive compensation, as well as the mix of elements used to compensate our named executive officers on an annual basis.
Compensation Committee's Use of Market and Survey Data.
In light of the unique mix of businesses that comprise KAR Auction Services and the lack of directly
comparable public companies, the Compensation Committee has traditionally not adopted a specific peer group of companies for the purpose of formally benchmarking compensation. The Compensation
Committee understands that most companies consider pay levels at comparably-sized, peer companies when setting named executive officer compensation levels. Knowing this practice, the Compensation
Committee has attempted to develop a meaningful peer group for 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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38
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Table of Contents
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 using a combination of (i) survey data (cuts from the 2015 Aon Hewitt and Mercer general industry and service industry surveys); and (ii) proxy compensation
data of a "proxy comparator group" more formally in setting and adjusting base salary levels for 2016. In light of the lack of comparable companies for KAR's business, as noted above, companies in the
proxy comparator group were selected based on (i) a focus on service-oriented industries; (ii) comparable revenue and market capitalization levels (KAR represents the
41
st
and 53
rd
percentiles, respectively, within the selected proxy comparator group on these measures); (iii) comparable growth, profitability and/or
market valuation profiles; and (iv) the avoidance of over-representing any one industry. Where possible, the
Compensation Committee included companies that are in related or similar industries to the Company. The proxy comparator group used in late 2015 consisted of the following 30 companies:
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Allison Transmission Holdings, Inc.
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Kansas City Southern
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Steelcase, Inc.
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AOL, Inc.
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Kirby Corp.
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Stericycle, Inc.
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Cintas Corp.
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Landstar System, Inc.
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Teradata Corp.
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Comerica, Inc.
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LKQ Corp.
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Tetra Tech, Inc.
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Copart, Inc.
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MSC Industrial Direct Co., Inc.
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Total System Services, Inc.
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Equifax, Inc.
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Old Dominion Freight Line, Inc.
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Trimble Navigation Ltd.
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GATX Corp.
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Plexus Corp.
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Vantiv, Inc.
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Heartland Payment Systems, Inc.
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Ritchie Bros. Auctioneers, Inc.
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Waste Connections, Inc.
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HNI Corp.
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Solera Holdings, Inc.
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Werner Enterprises, Inc.
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Itron, Inc.
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Springleaf Holdings, Inc.
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Westinghouse Air Brake Technologies Corp.
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The
Compensation Committee viewed the proxy comparator group and market data as an important guide, but not as the sole determinant in making its decisions regarding 2016 base salary levels. The
Compensation Committee also considered experience and tenure, sustained performance and specific requirements of roles relative to market.
Role of the Independent Compensation Consultant.
The Compensation Committee used Semler Brossy as its independent compensation consultant in 2015. During 2015,
Semler Brossy 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.
The
Compensation Committee has reviewed the independence of Semler Brossy in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that the work of Semler
Brossy for the Compensation Committee does not raise any conflict of interest. All work performed by Semler Brossy is subject to review and approval of the Compensation Committee.
Role of the Executive Officers.
Mr. Hallett regularly participates in meetings of the Compensation Committee at which compensation actions involving our
named executive officers are discussed. Mr. Hallett assists the Compensation Committee by making recommendations regarding compensation actions relating to the
executive officers other than himself. Mr. Hallett recuses himself and does not participate in any portion of any meeting of the Compensation Committee at which his compensation is discussed.
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39
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Table of Contents
|
ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY
AND OBJECTIVES
|
Elements of 2015 Executive Compensation Program
Design
The following table lists the elements of compensation for our 2015 executive compensation program. The program uses a mix of fixed
and variable compensation elements and provides alignment with both short- and long-term business goals through annual and long-term incentives. Our incentives are designed to drive overall corporate
performance and business unit strategies that correlate to stockholder value and align with our strategic vision. In order to confirm competitiveness of compensation, the Compensation Committee
reviews survey data and proxy compensation data of other companies.
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Element
|
|
Key
Characteristics
|
|
Why We Pay
This Element
|
|
How We
Determine Amount
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|
2015
Decisions
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Fixed
|
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Base salary
|
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Fixed compensation component payable in cash. Reviewed annually and adjusted when appropriate.
|
|
Reward the NEOs for their past performance and facilitate the attraction and retention of a skilled and experienced executive management team.
|
|
Individual performance, experience, job scope, tenure and review of competitive pay practices.
|
|
One named executive officer received a salary increase in 2015. See page 42.
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Variable
|
|
Annual cash incentive awards
|
|
Variable compensation component payable in cash based on performance against annually established targets.
|
|
Motivate and reward the successful achievement of pre-determined financial objectives at the Company.
|
|
Individual performance, experience, job scope and review of competitive pay practices.
Based on achievement of 2015 Adjusted EBITDA.
|
|
Strong performance resulted in 114% of target for the CEO and an average of 115% of target for the other named executive officers. See page 45.
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Performance restricted stock units (PRSUs)
|
|
PRSUs vest at the end of a three-year performance period.
See pages 46 for the retention requirements for PRSUs.
|
|
Motivate and reward executives for performance on key long-term measures.
Align the interests of executives with long-term stockholder value and serve to retain executive talent.
|
|
Target awards based on individual's ability to impact future results, job scope, individual performance and review of competitive pay practices.
Earned awards based on
Cumulative Adjusted Net Income Per Share performance through December 31, 2017.
PRSU awards made up 75% of the value of the aggregate long-term incentives granted to
the named executive officers in 2015.
|
|
The Compensation Committee granted PRSUs to all of the named executive officers in 2015. See pages 46 to 47.
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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 Company, provided that the Company achieves $100 million in adjusted
net income in its 2015 fiscal year, as reported by the Company (which condition was satisfied).
|
|
Align the interests of executives with long-term stockholder value and serve to retain executive talent.
|
|
Awards based on individual's ability to impact future results, job scope, individual performance and review of competitive pay practices.
RSU awards made up 25% of the
value of the aggregate long-term incentives granted to the named executive officers in 2015.
|
|
The Compensation Committee granted RSUs to all of the named executive officers in 2015. See page 46.
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40
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Table of Contents
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 2015 for our CEO and the average of our other named executives is shown in the
charts below. Approximately 80% of our CEO's total compensation, and approximately 70% of the average total compensation of our other named executive officers, is at-risk, consisting of stock options
and other performance-based incentives. As we move away from historical incentive programs developed in large part by our former equity sponsors, the Compensation Committee continues to refine the
elements, mix of awards and performance goals in our incentive compensation program, while ensuring that a large portion of our named executive officers' compensation is performance-based.
CEO
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41
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Table of Contents
Other NEO Average Compensation
Base Salary
General.
Annual salary levels for our named executive officers are based upon various factors, including the amount and relative percentage of total compensation
that is derived from base salary when setting the compensation of our executive officers, individual performance, experience, job scope and tenure. In view of the wide variety of factors considered by
the Compensation Committee in connection with determining the base salary of each of our named executive officers, the Compensation Committee has not attempted to rank or otherwise assign relative
weights to the factors that it considers. A description of how these factors were applied in 2015 is described below.
Base Salaries for 2015.
In late 2014 and the first quarter of 2015, the Compensation Committee reviewed the base salaries of each of our named executive officers
for 2015. After considering multiple factors, the Compensation Committee approved a base salary adjustment only for Mr. Loughmiller. The Compensation Committee did not approve base salary
adjustments for Messrs. Hallett, St-Hilaire, Kett or Gottwald because the Compensation Committee determined that their base salaries were already set at competitive levels. The following base
salaries were in effect for 2015:
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Name
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|
Base Salary
|
|
Increase %
|
|
Effective Date
|
|
Why Was Increase Approved?
|
Jim Hallett
|
|
$900,000
|
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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
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|
$550,000
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0%
|
|
January 1, 2014
|
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N/A.
|
Stéphane St-Hilaire
|
|
$450,000
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0%
|
|
January 1, 2014
|
|
N/A.
|
John Kett
|
|
$450,000
|
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0%
|
|
January 1, 2014
|
|
N/A.
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42
|
Table of Contents
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:
|
|
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|
|
Name
|
|
Base Salary
|
|
Increase %
|
Jim Hallett
|
|
$900,000
|
|
0%
|
Eric Loughmiller
|
|
$450,000
|
|
0%
|
Don Gottwald
|
|
$566,500
|
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3%
|
Stéphane St-Hilaire
|
|
$459,000
|
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2%
|
John Kett
|
|
$463,500
|
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3%
|
The
Compensation Committee did not approve base salary adjustments for Messrs. Hallett or Loughmiller because the Compensation Committee determined that their base salaries were already set at
competitive levels. In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of other companies.
Annual Cash Incentive Programs
General.
Generally, named executive officers with greater job responsibilities have a significant proportion of their annual cash compensation tied to Company
performance through their annual incentive opportunity.
The KAR Auction Services, Inc. Annual Incentive Program.
Under the KAR Auction Services, Inc. Annual Incentive Program (the "Annual Incentive
Program"), which is part of the Omnibus Plan, the grant of cash-based awards to eligible participants is contingent upon the achievement of certain corporate performance goals as determined by the
Compensation Committee.
In 2015, the Compensation Committee used "2015 Adjusted EBITDA" for KAR Auction Services, ADESA and IAA, depending upon the named executive officer,
as the measure of 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:
-
-
gains and losses from asset sales;
-
-
unrealized foreign currency translation gains and losses in respect of indebtedness;
-
-
certain non-recurring gains and losses;
-
-
stock based compensation expense;
-
-
certain other non-cash amounts included in the determination of net income;
-
-
charges and revenue reductions resulting from purchase accounting;
-
-
minority interest;
-
-
expenses associated with the consolidation of salvage operations;
-
-
consulting expenses incurred for cost reduction, operating restructuring and
business improvement efforts;
-
-
expenses realized upon the termination of employees and the termination or cancellation of leases, software licenses or other
contracts in connection with the operational restructuring and business improvement efforts;
-
-
expenses incurred in connection with permitted acquisitions;
-
-
any impairment charges or write-offs of intangibles; and
-
-
any extraordinary, unusual or non-recurring charges, expenses or losses.
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Using
these measures, the Compensation Committee establishes, on an annual basis, specific targets that determine the size of payouts under the incentive plan. In 2015, the annual incentive
opportunity for each named executive officer was as follows:
|
|
|
|
|
|
|
Name
|
|
KAR Auction Services
|
|
ADESA
|
|
IAA
|
Jim Hallett
|
|
Annual incentive award based 100% on performance of KAR Auction Services
|
|
|
|
|
Eric Loughmiller
|
|
Annual incentive award based 100% on performance of KAR Auction Services
|
|
|
|
|
Don Gottwald
|
|
Annual incentive award based 100% on performance of KAR Auction Services
|
|
|
|
|
Stéphane St-Hilaire
|
|
Annual incentive award based 50% on performance of KAR Auction Services
|
|
Annual incentive award based 50% on performance of ADESA
|
|
|
John Kett
|
|
Annual incentive award based 50% on performance of KAR Auction Services
|
|
|
|
Annual incentive award based 50% on performance of IAA
|
The
amount to be earned by our named executive officers under the Annual Incentive Program is determined by multiplying each officer's target opportunity by the Business Performance Factor as shown
below:
The Compensation Committee analyzes financial measures and determines the level of performance required to receive threshold, target and superior
annual incentive payouts. The Compensation Committee established the performance objectives in amounts which it believes would increase stockholder value and which it believed would be achievable
given a sustained effort on the part of the named executive officers and which would require increasingly greater effort to achieve the target and superior objectives. The Compensation Committee may
increase or decrease the performance targets and the potential payouts at each performance target if, in the discretion of the Compensation Committee, the circumstances warrant such an adjustment. In
2015, the Compensation Committee did not increase or decrease the performance targets or the payouts of any 2015 annual incentive program payout.
2015 Performance Targets.
The chart which follows provides the 2015 Adjusted EBITDA performance targets established by the Compensation Committee for 2015 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
|
%
|
*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 reported
Adjusted
|
|
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EBITDA for the year ended December 31, 2015 was $328.6 million and did not include such technology expenses recorded in "holding company" expenses.
2015 Annual Incentive Opportunities.
Under the Annual Incentive Program, threshold performance objectives must be met in order for any payout to occur. Payouts can
range from 50% of target awards for performance at threshold up to a maximum of 150% of target awards for superior performance or no payout if performance
is below threshold. The following table 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
|
Because
KAR Auction Services, ADESA and IAA each achieved at least the threshold level of performance, each of our named executive officers was eligible to receive an award under the Annual Incentive
Program for 2015, which are set forth in the Summary Compensation Table (page 53). Based on the Company's performance during 2015, and the accompanying payout percentages for the different
performance goals set forth above, our named executive officers earned the following percentages and corresponding payout amounts of their target annual incentive awards:
|
|
|
|
|
Name
|
|
Percentage of Target
Annual Incentive
Award Earned
|
|
2015 Payout
|
Jim Hallett
|
|
113.7%
|
|
$1,023,613
|
Eric Loughmiller
|
|
113.7%
|
|
$383,855
|
Don Gottwald
|
|
113.7%
|
|
$625,541
|
Stéphane St-Hilaire(1)
|
|
122.9%
|
|
$553,145
|
John Kett
|
|
106.9%
|
|
$481,030
|
-
(1)
Mr. St-Hilaire's
2015 annual incentive award was computed partially in Canadian dollars and partially in U.S. dollars due to his mid-year move from
our Canadian payroll to our U.S. payroll. The Canadian portion of the award was $235,663 CDN, and the U.S. portion of the award was $382,855. Using an exchange rate of .7226 as of December 31,
2015, the Canadian portion of Mr. St-Hilaire's award was converted to $170,290, for a total payout of $553,145.
Long-Term Incentive Opportunities
The Company provides long-term incentive compensation opportunities in the form of performance-based restricted stock units ("PRSUs")
and restricted stock units, and previously had provided performance-based stock options and service-based stock options, each as described below.
2015 Long-Term Incentive Awards.
As previously disclosed, on February 20, 2015, the Compensation Committee granted PRSUs and restricted stock units ("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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|
45
|
Table of Contents
stock
in late 2013. The aggregate target award value for each named executive officer was allocated such that 75% of the value was in the form of PRSUs and 25% of the value was in the form of RSUs.
|
|
|
|
|
|
|
|
|
Name
|
|
Target PRSUs
(Cumulative
Adjusted Net
Income Per
Share Goal)
|
|
Value of
Target Shares
at Grant
|
|
RSUs
|
|
Value of
RSUs at Grant
|
Jim Hallett
|
|
57,879
|
|
$2,142,681
|
|
19,293
|
|
$714,227
|
Eric Loughmiller
|
|
26,796
|
|
$991,988
|
|
8,932
|
|
$330,663
|
Don Gottwald
|
|
14,738
|
|
$545,601
|
|
4,913
|
|
$181,879
|
Stéphane St-Hilaire
|
|
9,647
|
|
$357,132
|
|
3,216
|
|
$119,056
|
John Kett
|
|
9,647
|
|
$357,132
|
|
3,216
|
|
$119,056
|
The PRSUs will vest if and to the extent that the Company's "Cumulative Adjusted Net Income Per Share" exceeds certain levels over the three-year
period beginning on January 1, 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, 2015 and ending on December 31, 2017.
"Adjusted
Net Income Per Share" for a fiscal year is calculated by dividing Adjusted Net Income by the weighted average diluted common shares outstanding per year. "Adjusted Net Income" for a fiscal
year is equal to the Company's net income as reported in the Form 10-K filed by the Company with respect to such fiscal year, adjusted to (i) exclude gains/losses from certain
nonrecurring and unbudgeted capital transactions, including debt prepayment, debt refinancing and similar items; (ii) exclude depreciation and amortization expenses resulting from the
revaluation of certain assets at the time of the 2007 merger consistent with the Company's calculation of its reported adjusted net income; (iii) exclude certain expenses incurred in connection
with stock-based compensation related to the 2007 merger consistent with the Company's calculation of its reported adjusted net income; (iv) exclude acquisition contingent consideration;
(v) exclude the impact of significant acts of God or other events outside of the Company's control that may affect the overall economic environment; and (vi) exclude significant asset
impairments.
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. 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.
The RSUs will vest and convert into shares of common stock of the Company on a 1-for-1 basis on each of the first three anniversaries of the grant
date, subject to the named executive officer's continued employment with the Company through each such anniversary, provided that the Company has achieved $100 million in adjusted net income in
its 2015 fiscal year (as reported in the Form 10-K filed by the Company with respect to such fiscal year, and which condition was satisfied).
Prior Years' Awards.
As previously disclosed, on February 27, 2014, the Compensation Committee approved the grant of PRSUs and stock options to certain of the
Company's named executive officers which remain outstanding, the amounts of which are disclosed in the "Outstanding Equity Awards" table below to the extent they remain outstanding.
The
stock options have an exercise price of $30.89 per share and vest in equal 25% increments on the first four anniversaries of the grant date, subject to the executive's continued employment with
the Company through each such anniversary.
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Fifty
percent of the PRSUs vest on the third anniversary of the grant date if and to the extent that the Company's total stockholder return relative to that of companies within the S&P 500
Index exceeds certain levels (identified below) over the three-year period beginning on the grant date.
|
|
|
Total Stockholder Return Percentile Rank
vs. S&P 500 During the Measurement
Period
|
|
Number of PRSUs Vesting
|
Below Threshold:
|
|
|
Below 40th percentile
|
|
0% of Target
|
Threshold:
|
|
|
40th percentile
|
|
50% of Target
|
Target:
|
|
|
65th percentile
|
|
100% of Target
|
Maximum:
|
|
|
Greater than or equal to 85th percentile
|
|
200% of Target
|
The
remaining 50% of the PRSUs vest if and to the extent that the Company's Cumulative Adjusted Net Income Per Share (as described above with respect to the 2015 PRSUs) exceeds certain levels over the
three-year period beginning on January 1, 2014 and ending on December 31, 2016.
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.
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:
-
-
one-fourth of the total amount of each option grant to our named executive officers were service options, which vested in four equal
annual installments on each of the first four anniversaries of the grant date and continue to function as an employee retention tool after vesting by rewarding continued service; and
-
-
the remaining three-fourths of the amount of each option grant were performance-based exit options, which reward employees' efforts
toward increasing the value of the Company and also serve as a retention tool because grantees generally are required to remain employed to benefit from the increase in the value of the Company.
Grants after March 1, 2010 and prior to our former equity owners' exit were 100% service options and were granted under the Omnibus Plan.
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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Table of Contents
The performance-based exit options vested and became exercisable in four tranches contingent upon the closing price of the shares of common stock of
the Company exceeding the threshold levels of $20.00, $25.00, $30.00 or $35.00 for 20 consecutive trading days. The exit options included in the first tranche (the exit options associated with the
$20.00 threshold level) became fully vested in March 2013, the exit options included in the second tranche (the exit options associated with the $25.00 threshold level) became fully vested in August
2013, the exit options included in the third tranche (the exit options associated with the $30.00 threshold level) became fully vested in March 2014 and the exit options included in the fourth tranche
(the exit options associated with the $35.00 threshold level) became fully vested in March 2015, upon achieving the applicable vesting criteria.
Plans under which Long-Term Incentive Awards are Granted.
The Company currently grants long-term incentive awards under the Omnibus Plan and formerly granted
awards under the Stock Incentive Plan.
Our Board of Directors initially adopted the Omnibus Plan on December 10, 2009, as amended. Under the Omnibus Plan, participants are eligible
to receive options, restricted stock, restricted stock units, SARs, other stock-based awards or cash-based awards as determined by the Compensation Committee.
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"). The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare
programs include medical, dental, vision, pharmacy, life insurance, disability and accidental death and disability. We also provide travel insurance to all employees who travel for business purposes.
Perquisites
In general, the Compensation Committee believes that the provision of a certain level of perquisites and other personal benefits to
the named executive officers is reasonable and consistent with the objective of facilitating and allowing us to attract and retain highly qualified executive officers. The perquisites which are
currently available to certain of our named executive officers include an automobile allowance or use of a Company-owned automobile, an allowance for executive physicals and Company-paid group term
life insurance premiums. Please see footnote 4 to the Summary Compensation Table for more information regarding perquisites.
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48
|
Table of Contents
|
COMPENSATION POLICIES AND OTHER INFORMATION
|
Employment and Severance Agreements
The Compensation Committee recognizes that, from time to time, it is appropriate to enter into agreements with our executive officers
to ensure that we continue to retain their services and to promote stability and continuity within the Company. All of our named executive officers have an employment agreement with KAR Auction
Services or one of its subsidiaries. A description of these agreements can be found in the section titled "Potential Payments Upon Termination or Change in ControlEmployment Agreements
with Named Executive Officers."
Tax and Accounting Considerations
Employment Agreements.
Section 280G of the Internal Revenue Code ("Section 280G") and related provisions impose substantial excise taxes under
Section 4999 of the Code on so-called "excess parachute payments" payable to certain named executive officers upon a change in control and results in the loss of the compensation deduction for
such payments by the Company.
Mr. Hallett's
employment agreement, which became effective as of February 27, 2012, provides for a potential "gross-up payment" in the event that such excise taxes result from any excess
parachute payments. Mr. Hallett's employment agreement provides that in the event that any payment or benefit under such agreement in connection with Mr. Hallett's employment or
termination of employment is or becomes subject to an excise tax under Code Section 4999, then 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, Gottwald, St-Hilaire and Kett contain excise tax gross-up provisions.
Omnibus Plan.
Certain awards under the Omnibus Plan are designed so that they may comply with the performance-based compensation exception to the $1,000,000 per
person annual deductibility limit under Section 162(m) applicable to Covered Employees. Though tax deductibility is one of many factors considered by the Compensation Committee when determining
executive compensation, the Compensation Committee retains the discretion to award compensation that exceeds or does not qualify for the Section 162(m) deductibility limit. For example, in
seeking to tie executive pay to company performance in a meaningful way, the Compensation Committee may make decisions in designing and approving pay programs that are not driven by tax consequences
to the Company.
Accounting for Stock-Based Compensation.
We account for stock-based compensation in accordance with the requirements of ASC 718.
Clawback Policy for Financial Restatements.
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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Table of Contents
Insider Trading Policy
Our insider trading policy expressly prohibits:
-
-
ownership of margin securities;
-
-
trading in options, warrants, puts and calls or similar instruments on the Company's securities; or
-
-
selling the Company's securities "short."
We
also prohibit officers, directors and employees from:
-
-
pledging the Company's securities as collateral for loans; and
-
-
purchasing or selling the Company's securities while in possession of material, non-public information, or otherwise using such
information for their personal benefit.
Our
executives and directors are permitted to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934 so that they can
prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates.
Anti-Hedging Policy
In addition to the Company's existing anti-pledging of Company stock policy, the Company adopted a formal anti-hedging of Company
stock policy in 2014. This policy prohibits our officers and directors from engaging in certain forms of hedging or monetization transactions with respect to the Company's stock, such as prepaid
variable forward contracts, equity swaps, collars and exchange funds.
Stock Ownership and Stock Holding Guidelines
In 2015, we adopted the following stock ownership guidelines which are applicable to our named executive officers.
|
|
|
|
|
|
|
|
|
Title
|
|
Stock Ownership Guideline
|
|
|
|
|
CEO
|
|
5 times annual base salary
|
|
|
|
|
Other Named Executive Officers
|
|
3 times annual base salary
|
|
|
The
named executive officers must hold 100% of net shares of Company stock received under awards granted on or after January 1, 2015 until the applicable ownership guideline is met. In
addition, our named executive officers are required to hold 100% of net shares of Company stock received under awards granted on or after January 1, 2015 for at least 12 months after
vesting, regardless of whether the stock ownership guideline has been met.
The
Company's non-employee directors are subject to the Company's director stock ownership and holding guidelines. The stock holding guideline requires each non-employee director to hold any shares of
the Company's common stock granted after January 1, 2014 for at least four years, subject to certain exceptions approved by the Compensation Committee. The stock ownership guideline, which was
adopted in 2015, requires each non-employee director to own a minimum of three times his or her annual cash retainer amount in shares of Company stock.
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|
50
|
Table of Contents
|
RESULTS OF SAY ON PAY VOTES AT 2014 ANNUAL MEETING
|
At
the Company's 2014 annual meeting of stockholders, the Company held a non-binding stockholder vote on executive compensation (commonly referred to as "Say on Pay"). At
the meeting, excluding broker non-votes, over 95% of the votes on the matter were cast to approve the Company's executive compensation programs, less than 4% of the votes were cast against, and less
than 1% abstained from voting.
The
Compensation Committee considered the results of the vote, including the appropriateness of the compensation philosophy and objectives, the role of the Compensation Committee and executive
officers in setting compensation, the elements used to achieve the compensation philosophy and objectives and the levels of compensation provided to the named executive officers. Following its review,
the Compensation Committee decided to retain the Company's general approach to executive compensation in 2014 and 2015, in part due to the significant majority of stockholders that voted to approve
the Company's executive compensation programs at the 2014 annual meeting of stockholders.
Previously,
at the Company's 2011 annual meeting of stockholders, the Company held a non-binding stockholder vote at the meeting on whether to hold a Say on Pay vote every one, two or three years.
Approximately 12% of the votes on the matter were cast in favor of holding a vote every year, less than one-tenth of 1% were cast in favor of holding a vote every two years, approximately 86% were
cast in favor of holding a vote every three years and approximately 2% abstained or constituted a broker non-vote. In line with the results of the vote, the Company will present a Say on Pay vote
every three years, the next of which will occur at the Company's 2017 annual meeting of stockholders.
|
COMPENSATION COMMITTEE REPORT
|
The
Compensation Committee, which was chaired by 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 2015 and discussed that analysis with management. Based on its review and discussions with management, the Compensation
Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. This report is submitted by Donna R. Ecton, J. Mark Howell,
Lynn Jolliffe and John P. Larson, being all current members of the Compensation Committee, and Peter R. Formanek, who was the Chairman of the Compensation Committee for a portion of
2015.
Compensation Committee
Donna R. Ecton
(Chairman)
Peter R. Formanek
J. Mark Howell
Lynn Jolliffe
John P. Larson
|
|
51
|
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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 outcomesperformance assessments and pay decisionsthe 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.
In
its evaluation, the Compensation Committee reviewed the Company's employee compensation structures and noted numerous design elements that manage and mitigate risk without diminishing the incentive
nature of the compensation. There is a balanced mix between cash and equity and annual and longer-term incentives. In addition, annual incentive awards and long-term incentive awards granted to
executives are tied to corporate performance goals, including Adjusted EBITDA, TSR and Cumulative Adjusted Net Income Per Share. These metrics encourage performance that supports the business as a
whole. The executive annual incentive awards include a maximum payout opportunity equal to 150% of target. Our executives are also expected to meet share ownership guidelines in order to align the
executives' interests with those of our stockholders. Also, the Company's clawback policy permits the Company to recover incentive compensation paid to an executive officer if the compensation
resulted from any financial result or metric impacted by the executive officer's misconduct or fraud. This policy helps to discourage inappropriate risks, as executives will be held accountable for
misconduct which is harmful to the Company's financial and reputational health.
The
Compensation Committee also reviewed the Company's compensation programs for certain design features that may have the potential to encourage excessive risk-taking, including: over-weighting
towards annual incentives, highly leveraged payout curves, unreasonable thresholds and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout
thresholds. The Compensation Committee concluded that the Company's compensation programs (i) do not include such 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.
|
|
52
|
Table of Contents
|
SUMMARY COMPENSATION TABLE FOR 2015
|
The
table below contains information concerning the compensation of our (i) chief executive officer; (ii) chief financial officer; and (iii) each of the
three other most highly compensated executive officers who were serving as executive officers as of December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO and Chairman
|
|
2014
|
|
$900,000
|
|
$1,477,796
|
|
$1,283,066
|
|
$1,106,118
|
|
$41,340
|
|
$4,808,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVP and CFO
|
|
2014
|
|
$442,534
|
|
$738,898
|
|
$641,546
|
|
$407,913
|
|
$32,026
|
|
$2,262,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
$433,857
|
|
$2,203,652
|
|
|
|
$278,027
|
|
$12,270
|
|
$2,927,806
|
|
Don Gottwald,
|
|
2015
|
|
$550,000
|
|
$727,480
|
|
|
|
$625,541
|
|
$31,385
|
|
$1,934,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Operating
|
|
2014
|
|
$523,388
|
|
|
|
|
|
$617,391
|
|
$29,750
|
|
$1,170,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
2013
|
|
$424,483
|
|
|
|
|
|
$430,638
|
|
$29,358
|
|
$884,479
|
|
Stéphane St-Hilaire,(5)
|
|
2015
|
|
$447,937
|
|
$476,188
|
|
|
|
$553,145
|
|
$80,059
|
|
$1,557,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO and President
|
|
2014
|
|
$434,363
|
|
$295,582
|
|
$256,634
|
|
$456,113
|
|
$93,051
|
|
$1,535,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of ADESA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Kett,(6)
|
|
2015
|
|
$450,000
|
|
$476,188
|
|
|
|
$481,030
|
|
$33,620
|
|
$1,440,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of IAA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
amounts reported in this column for 2015 represent the grant date fair value of PRSUs and RSUs granted on February 20, 2015, computed in
accordance with ASC 718. See Note 4 to our financial statements for 2015 regarding the assumptions made in determining the grant date fair value. The maximum award that can be earned at the end
of the performance period if maximum performance is achieved with respect to the 2015 PRSU awards, based on the grant date value of our common stock, is as follows:
Mr. Hallett $4,285,361; Mr. Loughmiller $1,983,976; Mr. Gottwald $1,091,202;
Mr. St-Hilaire $714,264; and Mr. Kett $714,264.
-
(2)
-
The
amounts reported in this column represent the grant date fair value computed in accordance with ASC 718. See Note 4 to our financial statements
for 2015 regarding the assumptions made in determining the grant date fair value.
-
(3)
-
The
amount reported is equal to the amount paid to the named executive officer under the Annual Incentive Program, which is governed by the Omnibus Plan.
-
(4)
-
The
amounts reported for 2015 consist of the following:
-
-
Automobile allowance: Mr. Hallett $25,000;
Mr. Gottwald $18,000; Mr. Kett $18,000.
-
-
Cost of providing Company car: Mr. Loughmiller $19,885;
Mr. St-Hilaire $37,835.
-
-
401(k) or GRRSP matching contributions: Mr. Hallett $10,600;
Mr. Loughmiller $10,600; Mr. Gottwald $10,600; Mr. St-Hilaire $873;
Mr. Kett $10,600.
-
-
Company-paid group term life insurance premiums:
Mr. Hallett $5,940; Mr. Loughmiller $3,870; Mr. Gottwald $1,350;
Mr. St-Hilaire $1,033; Mr. Kett $2,070.
-
-
Relocation and tax assistance: Mr. St-Hilaire $40,318.
-
-
Executive physicals: Mr. Hallett $1,880;
Mr. Loughmiller $3,101; Mr. Gottwald $1,435; Mr. Kett $2,950.
|
|
53
|
Table of Contents
-
(5)
-
Mr. St-Hilaire's
amounts are denominated in U.S. dollars, but his salary from January 1, 2015 through April 24, 2015 was earned in
Canadian dollars. Mr. St-Hilaire's USD$450,000 annual salary was converted to CDN$522,648 using an exchange rate of 1.1614 as of January 2, 2015. From January 1, 2015 through
April 24, 2015, he earned CDN$188,762 of his annual salary. After April 24, 2015, Mr. St-Hilaire moved to the U.S. and was paid the rest of his annual salary in the amount of
USD$311,538. To sum the two currencies, the Company converted Mt. St-Hilaire's Canadian-paid salary to USD$136,399 using an exchange rate of .7226 as of December 31, 2015, resulting in
USD$447,937 in base salary for 2015.
Compensation
information for 2013 is not provided for Mr. St-Hilaire because he was not a named executive officer in that year.
-
(6)
-
Compensation
information for 2013 and 2014 is not provided for Mr. Kett because he was not a named executive officer in those years.
|
|
54
|
Table of Contents
|
GRANTS OF PLAN-BASED AWARDS FOR 2015
|
The
following table summarizes the payouts which our named executive officers could have received upon the achievement of certain performance objectives under the Annual
Incentive Program and the grants of PRSUs and RSUs made under the Omnibus Plan in 2015. We did not grant any option awards in 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
under Non-Equity Incentive
Plan Awards(1)
|
|
Estimated Future Payouts
under Equity Incentive
Plan Awards(2)
|
|
|
|
|
|
Name
(a)
|
|
Grant
Date
(b)
|
|
Threshold
($)(c)
|
|
Target
($)(d)
|
|
Maximum
($)(e)
|
|
Threshold
(#)(f)
|
|
Target
(#)(g)
|
|
Maximum
(#)(h)
|
|
Number of
Securities
Underlying
Restricted Stock
Units
(#)(3)(i)
|
|
Grant Date
Fair Value
of Stock
Awards
($)(4)(l)
|
|
Jim Hallett
|
|
|
|
|
|
450,000
|
|
|
900,000
|
|
|
1,350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
28,940
|
|
|
57,879
|
|
|
115,758
|
|
|
|
|
|
2,142,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,293
|
|
|
714,227
|
|
Eric Loughmiller
|
|
|
|
|
|
168,750
|
|
|
337,500
|
|
|
506,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
13,398
|
|
|
26,796
|
|
|
53,592
|
|
|
|
|
|
991,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,932
|
|
|
330,663
|
|
Don Gottwald
|
|
|
|
|
|
275,000
|
|
|
550,000
|
|
|
825,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
7,369
|
|
|
14,738
|
|
|
29,476
|
|
|
|
|
|
545,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,913
|
|
|
181,879
|
|
Stéphane St-Hilaire(5)
|
|
|
|
|
|
225,000
|
|
|
450,000
|
|
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
4,824
|
|
|
9,647
|
|
|
19,294
|
|
|
|
|
|
357,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,216
|
|
|
119,056
|
|
John Kett
|
|
|
|
|
|
225,000
|
|
|
450,000
|
|
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
4,824
|
|
|
9,647
|
|
|
19,294
|
|
|
|
|
|
357,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,216
|
|
|
119,056
|
|
-
(1)
Columns (c),
(d) and (e) include the potential awards for performance at the threshold, target and maximum ("superior") levels,
respectively, under the Annual Incentive Program. See, "Compensation Discussion and AnalysisElements Used to Achieve Compensation Philosophy and ObjectivesAnnual Cash
Incentive Programs" for further information on the terms of the Annual Incentive Program.
(2)
Columns (f),
(g) and (h) include the potential number of PRSUs which may be earned for performance at the threshold, target and maximum
levels, respectively. These awards vest if and to the extent that the Company's Cumulative Adjusted Net Income Per Share exceeds certain levels over the three-year period beginning on
January 1, 2015.
(3)
Column (i) includes
the number of RSUs granted in 2015. These awards vest ratably on each of the first three anniversaries of the grant date
subject to the executive's continued employment with the Company and provided that the Company achieves $100 million in adjusted net income in its 2015 fiscal year (as reported by the Company
and which condition was satisfied).
(4)
The
amounts reported in this column represent the grant date fair value of awards granted on February 20, 2015, computed in accordance with
ASC 718. See Note 4 to our financial statements for 2015 regarding the assumptions made in determining the grant date fair value.
(5)
Mr. St-Hilaire's
base salary and annual incentive award is denominated in U.S. dollars. For 2015, his annual incentive award was paid partially in
Canadian dollars and partially in U.S. dollars, because he moved onto our U.S. payroll mid-year.
Additional information concerning our cash and equity incentive plans may be found in the sections titled "Compensation Discussion and
AnalysisElements Used to Achieve Compensation Philosophy and ObjectivesAnnual Cash Incentive Programs" and "Long-Term Incentive Opportunities," respectively.
|
|
55
|
Table of Contents
|
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR-END 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
(a)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
|
|
Option
Exercise
Price ($)
(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)
|
Jim Hallett
|
|
37,500
|
|
|
|
|
|
13.46
|
|
03/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,500
|
|
|
|
|
|
13.46
|
|
03/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,601
|
|
145,803(1)
|
|
|
|
30.89
|
|
02/27/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268,818(2)
|
|
9,954,331(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,832(3)
|
|
1,623,099(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,832(4)
|
|
1,623,099(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,758(5)
|
|
4,286,519(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,293(6)
|
|
714,420(6)
|
Eric Loughmiller
|
|
24,301
|
|
72,903(1)
|
|
|
|
30.89
|
|
02/27/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134,410(2)
|
|
4,977,202(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,916(3)
|
|
811,549(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,916(4)
|
|
811,549(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,592(5)
|
|
1,984,512(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,932(6)
|
|
330,752(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,585
|
|
|
|
|
|
10.00
|
|
08/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,294(5)
|
|
714,457(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,216(6)
|
|
119,088(6)
|
-
(1)
-
These
service options were granted on February 27, 2014 and vest ratably on each of the first four anniversaries of the date of grant.
-
(2)
-
The
total amounts and values in columns (i) and (j) equal the total number of PRSUs granted on December 13, 2013 that may be earned and
vest based on the extent to which the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds certain levels over a three-year period, at the maximum
level,
|
|
56
|
Table of Contents
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, which was $37.03 per share. In calculating the number of PRSUs
and their value, we are required by SEC rules to compare our performance through 2015 under the PRSU grants against the threshold, target and maximum performance levels for the grant and report in
these columns the applicable potential share number and payout amount. If the performance is between levels, we are required to report the potential payout at the next highest level. Through
December 31, 2015, we exceeded target levels of total stockholder return relative to that of companies within the S&P 500 Index and have accordingly reported the PRSUs at the maximum
award level.
-
(3)
-
The
total amounts and values in columns (i) and (j) equal the total number of PRSUs granted on February 27, 2014 that may be earned and
vest based on the extent to which the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds certain levels over a three-year period, at the maximum
level, 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, which was $37.03 per share. In calculating the number
of PRSUs and their value, we are required by SEC rules to compare our performance through 2015 under the PRSU grants against the threshold, target and maximum performance levels for the grant and
report in these columns the applicable potential share number and payout amount. If the performance is between levels, we are required to report the potential payout at the next highest level. Through
December 31, 2015, we exceeded target levels of total stockholder return relative to that of companies within the S&P 500 Index and have accordingly reported the PRSUs at the maximum
award level.
-
(4)
-
The
total amounts and values in columns (i) and (j) equal the total number of PRSUs granted on February 27, 2014 that may be earned and
vest based on the Company's Cumulative Adjusted Net Income Per Share performance over a three-year period, at the maximum level, 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, which was $37.03 per share. In calculating the number of PRSUs and their value, we are required by SEC rules to compare our
performance through 2015 under the PRSU grants against the threshold, target and maximum performance levels for the grant and report in these columns the applicable potential share number and payout
amount. If the performance is between levels, we are required to report the potential payout at the next highest level. Through December 31, 2015, we exceeded target levels of Cumulative
Adjusted Net Income Per Share performance and have accordingly reported the PRSUs at the maximum award level.
-
(5)
-
The
total amounts and values in columns (i) and (j) equal the total number of PRSUs granted on February 20, 2015 that may be earned and
vest based on the Company's Cumulative Adjusted Net Income Per Share performance over a three-year period, at the maximum level, 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, which was $37.03 per share. In calculating the number of PRSUs and their value, we are required by SEC rules to compare our
performance through 2015 under the PRSU grants against the threshold, target and maximum performance levels for the grant and report in these columns the applicable potential share number and payout
amount. If the performance is between levels, we are required to report the potential payout at the next highest level. Through December 31, 2015, we exceeded target levels of Cumulative
Adjusted Net Income Per Share performance and have accordingly reported the PRSUs at the maximum award level.
-
(6)
-
The
total amounts and values in columns (i) and (j) equal the total number of RSUs granted on February 20, 2015 that vest ratably on
each of the first three anniversaries of the grant date during the named executive officer's continued employment with the Company through each such anniversary, multiplied by the market price of
Company common stock at the close of the last trading day in 2015, which was $37.03 per share.
|
|
57
|
Table of Contents
|
OPTION EXERCISES DURING FISCAL YEAR 2015
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
(a)
|
|
Number of Shares
Acquired on
Exercise (#)
(b)
|
|
Value Realized
on Exercise ($)
(c)
|
|
Jim Hallett
|
|
|
|
|
|
|
|
Eric Loughmiller
|
|
|
|
|
|
|
|
Don Gottwald
|
|
|
28,270
|
|
|
780,414
|
|
Stéphane St-Hilaire
|
|
|
|
|
|
|
|
John Kett
|
|
|
75,000
|
|
|
2,066,000
|
|
|
|
58
|
Table of Contents
|
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 AWARDSSTOCK INCENTIVE PLAN
AND OMNIBUS PLAN
|
To
the extent a named executive officer's employment agreement does not provide otherwise, the Stock Incentive Plan and the Omnibus Plan (and the related award agreements
thereunder) provide for the following treatment of stock options and other equity awards issued pursuant to the plans upon the termination of employment scenarios or a change in control, as set forth
below. As a result of the Stock Incentive Plan being frozen by the Company on December 10, 2009, no additional stock options will be granted under this plan. Since December 10, 2009, all
grants of stock options and other equity awards have been and will be made pursuant to the terms of the Omnibus Plan. For RSU and PRSU awards granted on and after January 1, 2016, participants
who achieve an Early Retirement Date will receive pro rata vesting of RSUs and PRSUs (subject to achievement of performance conditions) based on the number of months worked through their Early
Retirement Date plus a credit of an additional 12 months (i.e., "pro rata plus 12 months"). "Early Retirement Date" will mean the date of the executive's voluntary termination of employment
after attaining a combination of years of age and service with the Company and its affiliates of at least 70, with a minimum age of 60.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or Change in Control Scenario
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
Type
|
|
|
|
Voluntary
Termination
|
|
|
|
Termination
by the Company
for Cause
|
|
|
|
Death, Disability
or Retirement
|
|
|
|
Termination
without Cause or
for Good Reason
|
|
|
|
Effect of
Change in Control
or Exit Event
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unless otherwise specified in an award agreement, all unvested equity-based awards under the Stock Incentive Plan and the Omnibus Plan will be forfeited upon a termination of employment for any reason.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
Omnibus Plan:
Voluntary resignation: vested options remain exercisable for 90 days (or until earlier expiration date).
For Cause: all vested and unvested options are cancelled.
Stock Incentive Plan:
All vested and unvested options are cancelled.
|
|
|
|
All vested options remain exercisable for one year (or until earlier expiration date).
In the event 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 PRSUs
2014 TSR PRSUs
2014 CANIPS PRSUs
2015
PRSUs
|
|
|
|
Automatic forfeiture.
|
|
|
|
Without Cause, for Good Reason, Retirement:
Prorated portion of the PRSUs based on the Company's actual performance during the performance period and the number of full months he/she was employed during such performance
period.
Death or Disability:
Full vesting of PRSU award based on the Company's actual performance during the
performance period.
|
|
|
|
2013 PRSUs, 2014 TSR PRSUS:
Double trigger vesting based on actual performance through date of Change in Control.
2014 CANIPS PRSUs:
Double trigger vesting at target.
2015 PRSUs:
Single
trigger vesting at target.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 RSUs
|
|
|
|
Voluntary Termination (with or without Good Reason), Retirement or Termination by the Company (for Cause or without Cause):
Forfeiture of any unvested 2015 RSUs.
Death or Disability:
Full vesting of any unvested 2015 RSUs.
|
|
|
|
Single trigger vesting if adjusted net income goal is attained.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unless
specified otherwise in a named executive officer's employment agreement, the termination of a named executive officer's employment with the Company or any subsidiary shall be deemed to be for
"cause" under the Omnibus Plan and the Stock Incentive Plan upon any of the following events: (i) the refusal or neglect of the named executive officer to perform substantially his
employment-related duties; (ii) the named executive officer's personal dishonesty, incompetence, willful misconduct, or breach of fiduciary duty; (iii) the named executive officer's
indictment for, conviction of, or entering a plea of guilty or
nolo contendere
to a crime constituting a felony or his willful violation of any
applicable law; (iv) the named executive officer's failure to reasonably cooperate, following a request to do so by the Company or any subsidiary, in any internal or governmental investigation;
or (v) the named executive officer's material breach of any written covenant or agreement not to disclose any information pertaining to the Company or any subsidiary or not to compete or
interfere with the Company or any subsidiary.
Unless
specified otherwise in a named executive officer's employment agreement, the termination of a named executive officer's employment with the Company or any subsidiary shall be deemed to be for
"good reason" under the Stock Incentive Plan if such named executive officer voluntarily terminates his or her employment with the Company or any subsidiary as a result of (i) the Company or
any subsidiary significantly reducing the named executive officer's current salary without the named executive officer's prior written consent; or (ii) the Company or any subsidiary taking any
action that would substantially diminish the aggregate value of the benefits provided to the named executive officer under the Company's or such subsidiary's accident, disability, life insurance, or
any other employee benefit plans in which the named executive officer participates. The Omnibus Plan does not provide a default "good reason" definition in the event such term is not specified in a
named executive officer's employment agreement.
|
|
60
|
Table of Contents
|
ANNUAL CASH INCENTIVE AWARDSOMNIBUS 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" above for more information.
Retirement:
Unless otherwise specified in an employment agreement, executive receives pro-rated amount of incentive award based on actual performance for the performance period.
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
Table of Contents
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLTABLE
|
The
amounts in the table below assume that the termination and/or change in control, as applicable, was effective as of December 31, 2015, the last business day of
the prior fiscal year, and that the respective named executive officers exercised all options and/or received cash in exchange for vested PRSUs and RSUs at such time. The 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
|
|
|
|
|
$
|
1,023,613
|
|
$
|
895,230
|
|
$
|
9,273,962
|
|
$
|
714,420
|
|
|
|
|
$
|
800,000
|
|
$
|
12,707,225
|
|
Disability (7)
|
|
|
|
|
$
|
1,023,613
|
|
$
|
895,230
|
|
$
|
9,273,962
|
|
$
|
714,420
|
|
|
|
|
|
|
|
$
|
11,907,225
|
|
Retirement (8)
|
|
|
|
|
$
|
1,023,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,023,613
|
|
Voluntary / for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o Cause or for Good
Reason
|
|
$
|
3,600,000 (9)
|
|
$
|
1,023,613
|
|
|
|
|
$
|
5,398,808
|
|
|
|
|
|
|
|
|
|
|
$
|
10,022,421
|
|
CIC (single trigger)
|
|
|
|
|
$
|
1,023,613
|
|
$
|
895,230
|
|
$
|
2,207,591
|
|
$
|
714,420
|
|
|
|
|
|
|
|
$
|
4,840,854
|
|
Termination after CIC (double trigger)
|
|
$
|
3,600,000 (9)
|
|
$
|
1,023,613
|
|
$
|
895,230
|
|
$
|
9,273,962
|
|
$
|
714,420
|
|
$
|
4,085,563
|
|
|
|
|
$
|
19,592,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Loughmiller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
$
|
13,560 (10)
|
|
$
|
383,855
|
|
$
|
447,624
|
|
$
|
4,555,245
|
|
$
|
330,752
|
|
|
|
|
$
|
800,000
|
|
$
|
6,531,056
|
|
Disability (7)
|
|
$
|
13,560 (10)
|
|
$
|
383,855
|
|
$
|
447,624
|
|
$
|
4,555,245
|
|
$
|
330,752
|
|
|
|
|
|
|
|
$
|
5,731,036
|
|
Retirement (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary / for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o Cause or for Good
Reason
|
|
$
|
801,060 (9)
|
|
$
|
383,855
|
|
|
|
|
$
|
2,419,991
|
|
|
|
|
|
|
|
|
|
|
$
|
3,604,906
|
|
CIC (single trigger)
|
|
|
|
|
$
|
383,855
|
|
$
|
447,624
|
|
$
|
1,022,039
|
|
$
|
330,752
|
|
|
|
|
|
|
|
$
|
2,184,270
|
|
Termination after CIC (double trigger)
|
|
$
|
801,060 (9)
|
|
$
|
383,855
|
|
$
|
447,624
|
|
$
|
4,555,245
|
|
$
|
330,752
|
|
|
|
|
|
|
|
$
|
6,518,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don Gottwald
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
$
|
19,644 (10)
|
|
$
|
625,541
|
|
|
|
|
$
|
562,129
|
|
$
|
181,928
|
|
|
|
|
$
|
800,000
|
|
$
|
2,189,242
|
|
Disability (7)
|
|
$
|
19,644 (10)
|
|
$
|
625,541
|
|
|
|
|
$
|
562,129
|
|
$
|
181,928
|
|
|
|
|
|
|
|
$
|
1,389,242
|
|
Retirement (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary / for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o Cause or for Good
Reason
|
|
$
|
1,119,644 (9)
|
|
$
|
625,541
|
|
|
|
|
$
|
187,376
|
|
|
|
|
|
|
|
|
|
|
$
|
1,932,561
|
|
CIC (single trigger)
|
|
|
|
|
$
|
625,541
|
|
|
|
|
$
|
562,129
|
|
$
|
181,928
|
|
|
|
|
|
|
|
$
|
1,369,598
|
|
Termination after CIC (double trigger)
|
|
$
|
1,119,644 (9)
|
|
$
|
625,541
|
|
|
|
|
$
|
562,129
|
|
$
|
181,928
|
|
|
|
|
|
|
|
$
|
2,489,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stéphane St-Hilaire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
$
|
13,560 (10)
|
|
$
|
553,145
|
|
$
|
179,061
|
|
$
|
713,356
|
|
$
|
119,088
|
|
|
|
|
$
|
800,000
|
|
$
|
2,378,210
|
|
Disability (7)
|
|
$
|
13,560 (10)
|
|
$
|
553,145
|
|
$
|
179,061
|
|
$
|
713,356
|
|
$
|
119,088
|
|
|
|
|
|
|
|
$
|
1,578,210
|
|
Retirement (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary / for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o Cause or for Good
Reason
|
|
$
|
913,560 (9)
|
|
$
|
553,145
|
|
|
|
|
$
|
343,324
|
|
|
|
|
|
|
|
|
|
|
$
|
1,810,029
|
|
CIC (single trigger)
|
|
|
|
|
$
|
553,145
|
|
$
|
179,061
|
|
$
|
367,951
|
|
$
|
119,088
|
|
|
|
|
|
|
|
$
|
1,219,245
|
|
Termination after CIC (double trigger)
|
|
$
|
913,560 (9)
|
|
$
|
553,145
|
|
$
|
179,061
|
|
$
|
713,356
|
|
$
|
119,088
|
|
|
|
|
|
|
|
$
|
2,478,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Kett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
$
|
19,366 (10)
|
|
$
|
481,030
|
|
|
|
|
$
|
367,951
|
|
$
|
119,088
|
|
|
|
|
$
|
800,000
|
|
$
|
1,787,435
|
|
Disability (7)
|
|
$
|
19,366 (10)
|
|
$
|
481,030
|
|
|
|
|
$
|
367,951
|
|
$
|
119,088
|
|
|
|
|
|
|
|
$
|
987,435
|
|
Retirement (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary / for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o Cause or for Good
Reason
|
|
$
|
919,366 (9)
|
|
$
|
481,030
|
|
|
|
|
$
|
122,650
|
|
|
|
|
|
|
|
|
|
|
$
|
1,523,046
|
|
CIC (single trigger)
|
|
|
|
|
$
|
481,030
|
|
|
|
|
$
|
367,951
|
|
$
|
119,088
|
|
|
|
|
|
|
|
$
|
968,069
|
|
Termination after CIC (double trigger)
|
|
$
|
919,366 (9)
|
|
$
|
481,030
|
|
|
|
|
$
|
367,951
|
|
$
|
119,088
|
|
|
|
|
|
|
|
$
|
1,887,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
Table of Contents
Footnotes to Potential Payments Upon
Termination or Change in Control Table
-
(1)
-
The amounts reported are equal to the full amount of the named executive officer's 2015 annual bonus (a
December 31, 2015 termination results in a 100% payout, whereas a termination on any other date would result in a prorated amount, assuming payment upon a change in control), payable under the
terms of such officer's employment agreement or the Omnibus Plan, as applicable.
-
(2)
-
The
amounts reported assume a Company common stock price of $37.03, which was the closing price on December 31, 2015. Messrs. Kett and
Gottwald did not have any outstanding, unvested options as of such date.
-
(3)
-
The
amounts reported assume a Company common stock price of $37.03, which was the closing price on December 31, 2015. In the event that a named
executive officer is terminated without Cause or resigns for Good Reason (each as defined in the applicable employment agreement), or such officer terminates employment due to his death, Disability or
Retirement (each as defined in the Omnibus Plan), he would be entitled to receive, at the same time as active Company employees, a prorated portion of the 2013, 2014 and/or 2015 PRSUs based on the
Company's actual performance during each performance period and the number of full months he was employed during each such performance period. Therefore, assuming a termination without Cause,
resignation for Good Reason, or the named executive officer's death, Disability or Retirement as of December 31, 2015, (i) Messrs. Hallett and Loughmiller would be entitled to
24/36ths of the 2013 PRSUs and 2014 CANIPS PRSUs, 22/36ths of the 2014 TSR PRSUs and 12/36ths of the 2015 PRSUs; (ii) Mr. St-Hilaire would be entitled to 24/36ths of the 2014 CANIPS
PRSUs, 22/36ths of the 2014 TSR PRSUs and 12/36ths of the 2015 PRSUs; and (iii) Messrs. Kett and Gottwald would be entitled to 12/36ths of the 2015 PRSUs; in each case, based on actual
performance. The amounts disclosed in the table assume performance at the target level.
-
-
If
a Change in Control (as defined in the Omnibus Plan) occurs prior to the termination of such officer's employment, assuming a Change in
Control date of December 31, 2015, he would be entitled to receive immediate vesting and payout of the target number of 2015 PRSUs, without proration.
-
-
If
Messrs. Hallett, Loughmiller or St-Hilaire are terminated without Cause or resign for Good Reason after the consummation of a Change
in Control but before the 2013 and/or 2014 PRSUs vest, then, assuming performance at the target level: (i) Messrs. Hallett and Loughmiller would be entitled to receive (a) the
full number of 2013 PRSUs earned based on actual performance from December 13, 2013 until the Change in Control date of December 31, 2015, (b) the full number of 2014 TSR PRSUs
earned based on actual performance from January 1, 2014 until the Change in Control date of December 31, 2015, and (c) the target number of 2014 CANIPS PRSUs; and
(ii) Mr. St-Hilaire would be entitled to receive (a) the full number of 2014 TSR PRSUs earned based on actual performance from January 1, 2014 until the Change in Control
date of December 31, 2015, and (b) the target number of 2014 CANIPS PRSUs.
-
(4)
-
The
amounts reported assume a Company common stock price of $37.03, which was the closing price on December 31, 2015. In the event a named executive
officer's employment is terminated for any reason prior to a Change in Control, such officer would forfeit the unvested portion of his 2015 RSU award. Therefore, assuming a termination date of
December 31, 2015 prior to a Change in Control, each named executive officer would forfeit his entire 2015 RSU award, because no portion of such award would be vested as of such date. 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, he would be entitled to receive immediate vesting and
payout of the unvested portion of his 2015 RSU award as of the Change in Control.
-
(5)
-
This
calculation was made using conservative assumptions, not taking into account any reductions in parachute payments attributable to reasonable
compensation payable before or after a Change in Control and not assigning any value to Mr. Hallett's non-compete obligations. Actual excise tax amounts and tax gross-up payments, if any, would
be calculated at the time of an actual Change in Control based on all factors and assumptions applicable at that time. No other named executive officer is entitled to an excise tax gross-up.
-
(6)
-
Under
the Group Term Life Policy, each named executive officer's designated beneficiary is entitled to a payment in an amount equal to two times his annual
salary, not exceeding $800,000.
-
(7)
-
Long-term
disability is a Company-paid benefit for all employees and only paid after six months on short-term disability. The benefit is 66.67% of base pay
capped at $15,000 per month.
|
|
63
|
Table of Contents
-
(8)
-
Pursuant
to the terms of his employment agreement, Mr. Hallett would be entitled to a prorated payout of his 2015 annual bonus (the full bonus for a
termination date of December 31, 2015) upon his "retirement" (i.e., a voluntary termination of his employment, provided that he announces his retirement at least 12 months prior
to such termination). Assuming a "retirement" date of December 31, 2015, Mr. Hallett would not have been entitled to receive accelerated vesting of any equity awards, because he had not
met the requirements for a Retirement under the Omnibus Plan as of such date (he had not reached the age of 65).
-
-
Messrs. Loughmiller,
St-Hilaire and Kett had not satisfied the Retirement requirements under the Omnibus Plan as of December 31,
2015 (i.e., none had reached the age of 65), 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.
-
(9)
-
These
amounts are equal to (i) for Mr. Hallett, (a) two times the sum of Mr. Hallett's current annual base salary ($900,000 as
of December 31, 2015) and 2015 target bonus amount; and (b) COBRA premium payments for 18 months (because Mr. Hallett did not participate in our group health plans as of
December 31, 2015, no COBRA premium amount is included in the figures above); and (ii) for all other named executive officers, (a) one times the sum of the officer's current
annual base salary ($450,000 for each of Messrs. Loughmiller, St-Hilaire and Kett; $550,000 for Mr. Gottwald) and 2015 target bonus amount; and (b) COBRA premium payments for
12 months.
-
(10)
-
Under
the terms of each named executive officer's employment agreement, he (or his estate) would be entitled to COBRA premium payments for 12 months
in the event of his death or Disability. Mr. Hallett (or his estate) would be entitled to COBRA premium payments for 18 months in the event of his death or Disability, but would not have
received this benefit with respect to a termination occurring on December 31, 2015 because he did not participate in our group health plans as of such date.
|
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
|
|
64
|
Table of Contents
"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 of
nolo contendere
to, a crime constituting a
felony or any other crime involving moral turpitude; or (iv) Mr. Hallett's failure to comply with the provisions of the employment agreement relating to confidential information,
intellectual property, non-competition and non-solicitation which is not cured within the 14 day period following written notice to Mr. Hallett of such failure.
Termination by the Company Without Cause.
Mr. Hallett's employment may be terminated without Cause at any time upon 30 days' prior written notice. In
the event of a termination without Cause, the Company will pay Mr. Hallett the following "Severance Benefits": (i) two times the sum of Mr. Hallett's (a) annual base salary
and (b) target bonus for the year in which termination occurs which, for this purpose, shall not equal less than 100% of Mr. Hallett's base salary; (ii) a Prorated Bonus in a lump
sum; and (iii) the Continued Benefits. In addition to the Severance Benefits described above, we will also pay Mr. Hallett the Accrued Obligations and any Earned but Unpaid Bonus.
Termination by Mr. Hallett for Good Reason.
Mr. Hallett may terminate his employment for "Good Reason" within 90 days following the occurrence
of an event constituting "Good Reason," if such event remains uncured for a period of 30 days following notice of the event by Mr. Hallett to the Company. Upon such termination, the
Company will pay Mr. Hallett the sum of the Severance Benefits, the Accrued Obligations and any Earned but Unpaid Bonus.
"Good
Reason" is defined in the employment agreement to mean the occurrence of any of the following:
-
-
A material reduction of Mr. Hallett's authority, duties and responsibilities, or the assignment to Mr. Hallett of duties
materially inconsistent with Mr. Hallett's position as Chief Executive Officer;
-
-
A requirement by the Company that Mr. Hallett relocate his principal business location to a
location more than 50 miles from
the Company's executive offices as of the effective date of the employment agreement;
-
-
Any material failure by the Company to comply with any of the terms and conditions of the
employment agreement;
-
-
Any failure to timely pay or provide Mr. Hallett's base salary, or any reduction in Mr. Hallett's base salary below
$816,000, other than in connection with across-the-board salary reductions;
-
-
Any material reduction in Mr. Hallett's base salary or annual bonus opportunity; or
-
-
A "Change of Control," defined by reference to the term "Change in Control" used the Omnibus Plan, occurs and, if applicable, the
Company fails to cause its successor to assume or reaffirm the Company's obligations under the employment agreement without change.
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 InformationTax and Accounting ConsiderationsEmployment
Agreements," Mr. Hallett's employment agreement provides that in the event that any payment or benefit in connection with his employment is or becomes subject to an excise tax under Code
Section 4999, the Company will make a cash payment to Mr. Hallett, which after the imposition of all income, employment, excise and other taxes thereon as well as any penalty and
interest assessments associated therewith, will be sufficient to place Mr. Hallett in the same after-tax position as he would have been in had such excise tax not applied. However, in the event
that a reduction of the total payments due to Mr. Hallett would avoid the application of the excise tax, then the total payments will be reduced to the extent
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necessary
to avoid the excise tax, but in no event by more than 10% of the original amount of the total payments due.
Requirements With Respect to Non-Competition and Non-Solicitation.
Upon a termination of employment for any reason, Mr. Hallett is subject to the following
two year post-termination restrictive covenants (except in the case of retirement): (i) non-competition restrictions; and (ii) non-solicitation of Company employees and customers.
Other Named Executive Officers
The Company has entered into substantially similar employment agreements with Messrs. Loughmiller, Gottwald St-Hilaire and
Kett, providing for their at-will employment and the following severance and change of control payments.
Termination Due to Death or Disability.
If Messrs. Loughmiller, Gottwald, St-Hilaire or Kett terminates his employment due to death or disability, the
Company will be obligated to pay to the executive (or his legal representatives) an amount equal to the sum of (i) any earned but unpaid base salary; (ii) accrued but unpaid vacation
earned through the date of termination; (iii) unreimbursed business expenses; and (iv) any vested employee benefits. The aggregate of the foregoing is referred to as the "Accrued
Obligations." In addition, the executive or his estate/beneficiaries would be entitled to receive (i) COBRA premium payments for 12 months or until the executive becomes eligible for
coverage under another employer's health plan, if the executive is participating in the Company's health plans on the date of such termination of employment, (the "Continued Benefits");
(ii) the prorated portion of his annual bonus for the calendar year in which such termination of employment occurred, calculated based on the executive's actual performance and based on the
number of days the executive was employed by the Company during such calendar year; and (iii) a payment equal to the amount of any annual bonus which has been earned in a prior year but which
has not yet been paid to the executive (the "Earned but Unpaid Bonus").
For
purposes of their employment agreements, "disability" means a "Total Disability" (or equivalent) as defined in the Company's long term disability plan in effect at the time of the disability.
Voluntary Termination or Termination for Cause.
If Messrs. Loughmiller, Gottwald, St-Hilaire or Kett
voluntarily terminates his employment or if the Company terminates his employment for Cause, the Company's sole obligation will be to pay him 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 of
nolo contendere
to, a crime constituting a felony or any other crime involving moral turpitude; or (iv) executive's violation of the restrictive
covenants under the agreement or any other covenants owed to the Company by executive.
Termination Without Cause or Resignation for Good Reason.
In the event Messrs. Loughmiller, Gottwald, St-Hilaire or Kett is terminated by the Company
without Cause or such executive resigns for Good Reason, the executive would be entitled to receive, subject to execution and non-revocation of a release of claims, (i) a lump sum cash payment
equal to the sum of his 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 his
principal business location to a location more than 50 miles from the executive's principal base of operation as of the effective date of the agreement; or (v) a Change of Control occurs and,
if applicable, the Company fails to cause its successor (whether by purchase, merger, consolidation or otherwise) to assume or reaffirm the
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Company's
obligations under the agreement without change. For purposes of the foregoing, "Change of Control" has the same meaning as the term "Change in Control" under the Omnibus Plan.
Requirements With Respect to Non-Competition and Non-Solicitation.
Upon a termination of employment for any reason, Messrs. Loughmiller, Gottwald,
St-Hilaire and Kett are subject to the following one year post-termination restrictive covenants: (i) non-competition restrictions; and (ii) non-solicitation of Company employees and
customers.
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CERTAIN RELATED PARTY RELATIONSHIPS
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REVIEW AND APPROVAL OF TRANSACTIONS
WITH RELATED PERSONS
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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:
-
-
the nature of the related person's interest in the transaction;
-
-
the material terms of the transaction, including, without limitation, the amount and type of transaction;
-
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the importance of the transaction to the related person;
-
-
the importance of the transaction to the Company;
-
-
whether the transaction would impair the judgment of a director or executive officer to act in our best interest; and
-
-
any other matters that we deem appropriate.
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.
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REQUIREMENTS, INCLUDING DEADLINES, FOR
SUBMISSION OF PROXY PROPOSALS
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NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS
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In
order to submit stockholder proposals for the 2017 annual meeting of stockholders for inclusion in the Company's proxy statement pursuant to SEC Rule 14a-8,
materials must be received by the Secretary at the Company's principal office in Carmel, Indiana, no later than December 29, 2016.
The
proposals must comply with all of the requirements of SEC Rule 14a-8. Proposals should be addressed to: Rebecca C. Polak, Executive Vice President, General Counsel and Secretary, KAR
Auction Services, Inc., 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032. As the SEC's shareholder proposal rules make clear, simply submitting a proposal does not guarantee its
inclusion.
The
Company's By-Laws also establish an advance notice procedure with regard to director nominations and stockholder proposals that are not submitted for inclusion in the proxy statement, but that a
stockholder instead wishes to present directly at an annual meeting. To be properly brought before the 2016 annual meeting, a notice of the nomination or the matter the stockholder wishes to present
at the meeting must be delivered to the Secretary at the Company's principal office in Carmel, Indiana (see above), not less than 90 or more than 120 days prior to the first anniversary of the
date of this year's annual meeting. As a result, any notice given by or on behalf of a stockholder pursuant to these provisions of the Company's By-Laws (and not pursuant to SEC Rule 14a-8)
must be received no earlier than February 8, 2017, and no later than March 10, 2017. All director nominations and stockholder proposals must comply with the requirements of the Company's
By-Laws, a copy of which may be obtained at no cost from the Secretary of the Company.
Other
than the proposals described in this proxy statement, KAR Auction Services does not expect any matters to be presented for a vote at the annual meeting. If you grant a proxy, the persons named
as proxy holders on the proxy card will have the discretion to vote your shares on any additional matters properly presented for a vote at the annual meeting. If for any unforeseen reason, any one or
more of KAR Auction Services' nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated
by the Board of Directors.
The
chairman of the meeting may refuse to allow the transaction of any business not presented beforehand, or to acknowledge the nomination of any person not made in compliance with the foregoing
procedures.
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QUESTIONS AND ANSWERS ABOUT THE PROXY
MATERIALS AND THE ANNUAL MEETING
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Q:
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Why am I receiving these materials?
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A:
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We are providing these proxy materials to you in connection with the solicitation, by the Board of Directors of KAR Auction Services, of proxies to be voted at the Company's 2016 annual meeting of stockholders and at any
adjournments or postponements thereof. Stockholders are invited to attend the annual meeting to be held on June 8, 2016 beginning at 9:00 a.m., Eastern Daylight Time, at the Conrad Indianapolis, 50 West Washington Street, Indianapolis,
Indiana 46204. Our proxy materials are first being distributed to stockholders on or about April 28, 2016.
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Q:
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What proposals will be voted on at the annual meeting?
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A:
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There are three proposals scheduled to be voted on at the annual meeting:
To elect nine directors to the Board of Directors;
To amend and restate the 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; and
To ratify the
appointment of KPMG as our independent registered public accounting firm for 2016.
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Q:
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What is the Board of Directors' voting recommendation?
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A:
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The Company's Board of Directors recommends that you vote your shares:
"FOR"
each of the nominees to the Board of Directors;
"FOR"
the amendment and restatement of the
Amended and Restated Certificate of Incorporation; and
"FOR"
the ratification of the appointment of KPMG as our independent registered public accounting firm for 2016.
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Q:
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Who is entitled to vote?
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A:
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All shares owned by you as of the record date, which is the close of business on April 13, 2016, may be voted by you. You may cast one vote per share of common stock that you held on the record date.
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 137,300,457 shares of common stock issued and outstanding.
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Q:
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What is the difference between holding shares as a stockholder of record and as a beneficial owner?
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A:
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Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.
Stockholder of Record
.
If your shares are registered directly in your name with the Company's
transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent to you directly by the Company. As the stockholder of
record, you have the right to grant your voting proxy directly to the Company or to vote in person at the annual meeting. You may vote on the Internet, by telephone or by mail, as described below under the heading "How can I vote my shares without
attending the annual meeting?"
Beneficial Owner
.
If your shares are held in a brokerage
account or by a bank or other nominee, you are considered the beneficial owner of shares held in "street name" and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the right to direct your broker on how to vote your shares and are also invited to attend the annual meeting. To vote these shares in person at the annual meeting, you must obtain a signed
proxy from the stockholder of record giving you the right to vote the shares. You may also vote by Internet, by telephone or by mail, as described below under "How can I vote my shares without attending the annual meeting?"
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Q:
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How can I vote my shares in person at the annual meeting?
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A:
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Stockholder of Record
.
Shares held directly in your name as the stockholder of record may be voted in person at the annual meeting. If you choose to vote
your shares in person at the annual meeting, please bring proof of identification. Even if you plan to attend the annual meeting, the Company strongly recommends that you vote your shares in advance as described below so that your vote will be
counted if you later decide not to attend the annual meeting. See "How can I vote my shares without attending the annual meeting?"
Beneficial
Owner
.
Shares held in street name may be voted in person by you only if you obtain an account statement or letter from your bank, broker or other nominee indicating that you are the beneficial
owner of the shares and a legal proxy from the stockholder of record giving you the right to vote the shares. The account statement or letter must show that you were the beneficial owner of shares on April 13, 2016, the record date.
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Q:
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How can I vote my shares without attending the annual meeting?
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A:
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Whether you hold your shares directly as the stockholder of record or beneficially in street name, you may direct your vote
without attending
the annual meeting by voting in one of the following
manners:
Internet
.
Go to
www.proxyvote.com
and follow the instructions. You will need the control number included on your proxy card or
voting instruction form;
Telephone
.
Dial 1-800-690-6903. You will need the control number included on your proxy card or voting instruction form; or
Mail
.
Complete, date and sign your proxy card or voting instruction card and mail it using the enclosed, pre-paid envelope.
If you vote on the Internet or by telephone, you do not need to return your proxy card or voting instruction card. Internet and telephone voting for stockholders will be available 24 hours a day, and will close at 11:59 p.m.,
Eastern Daylight Time, on June 7, 2016.
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Q:
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If I am an employee holding shares pursuant to the Employee Stock Purchase Plan, how will my shares be voted?
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A:
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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.
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Q:
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What is the quorum requirement for the annual meeting?
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A:
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A quorum is necessary to hold the annual meeting. A quorum at the annual meeting exists if the holders of a majority of the Company's capital stock issued and outstanding and entitled to vote at the annual meeting are
present in person or represented by proxy. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker does not vote on some matter on the proxy card because the broker does not have
discretionary voting power for that particular item and has not received instructions from the beneficial owner.
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Q:
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What happens if I do not give specific voting instructions?
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A:
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Stockholder of Record
.
If you are a stockholder of record and you sign and return a proxy card without giving specific voting instructions, then the proxy
holders will vote your shares in the manner recommended by the Board of Directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a
vote at the annual meeting.
Beneficial Owners
.
If you are a beneficial owner of shares
held in street name and do not provide the organization (e.g., broker or bank) that holds your shares in "street name" with specific voting instructions, the organization that holds your shares may generally vote on routine matters (Proposal
No. 3 (ratification of independent registered public accounting firm)) but cannot vote on non-routine matters (Proposal No. 1 (election of directors) and Proposal No. 2 (amendment and restatement of the Amended and Restated Certificate
of Incorporation)). If the organization that holds your shares does not receive instructions from you on how to vote your shares on Proposal No. 1 and/or Proposal No. 2, such organization will inform the inspector of election that it does
not have the authority to vote on these matters with respect to your shares. This is generally referred to as a "broker non-vote." Therefore, we urge you to give voting instructions to your broker. Shares represented by such broker non-votes will be
counted in determining whether there is a quorum. Because broker non-votes are not considered shares entitled to vote, they will have no effect on the outcome of any proposal other than reducing the number of shares present in person or by proxy and
entitled to vote from which a majority is calculated.
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Q:
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Which proposals are considered "routine" or "non-routine?"
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A:
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The ratification of the appointment of KPMG as our independent registered public accounting firm for 2016 (Proposal No. 3) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters,
and therefore no broker non-votes are expected to exist in connection with Proposal No. 3.
The election of directors (Proposal No. 1) and the amendment and
restatement of the Amended and Restated Certificate of Incorporation (Proposal No. 2) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore
there may be broker non-votes on Proposal No. 1 and Proposal No. 2.
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Q:
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What is the voting requirement to approve each of the proposals?
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A:
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Nine director nominees have been nominated for election at the annual meeting. Because this is an uncontested election, the director nominees will be elected by a majority of the votes cast in the election of directors at the annual meeting, either
in person or represented by a properly authorized proxy. This means that a director nominee will be elected to the Company's Board of Directors if the votes cast "FOR" such director nominee exceed the votes cast "AGAINST" him or her. Abstentions and
broker non-votes will have no effect on the outcome of the election of directors.
The amendment and restatement of the Amended and Restated Certificate of Incorporation
(Proposal No. 2) and the ratification of the appointment of our independent registered public accounting firm (Proposal No. 3) require the affirmative vote of a majority of the votes represented at the annual meeting and entitled to vote on
the proposal. In accordance with Delaware law, only votes cast "FOR" a matter constitute affirmative votes. A properly executed proxy marked "ABSTAIN" with respect to the ratification of the appointment of our independent registered public accounting
firm will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, with respect to Proposal No. 2 and Proposal No. 3, abstentions will have the same effect as negative votes or votes
"AGAINST" that matter.
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Q:
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What does it mean if I receive more than one proxy or voting instruction card?
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A:
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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.
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Q:
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Who will count the vote?
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A:
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The votes will be counted by the inspector of election appointed for the annual meeting.
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Q:
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Can I revoke my proxy or change my vote?
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A:
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Yes. You may revoke your proxy or change your voting instructions at any time prior to the vote at the annual meeting by:
providing written notice of revocation to the Secretary of the Company at 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032;
delivering a valid, later-dated proxy or a later-dated vote on the Internet or
by telephone; or
attending the annual meeting
and voting in person.
Please note that your attendance at the annual meeting in person will not cause your previously granted proxy to be revoked unless you vote in person
at the annual meeting. If you wish to revoke your proxy, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken. Shares held in street name may be voted in
person by you at the annual meeting only if you obtain a signed proxy from the record holder giving you the right to vote the shares.
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Q:
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Who will bear the cost of soliciting votes for the annual meeting?
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A:
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The Board of Directors of the Company is soliciting your proxy to vote your shares of common stock at the annual meeting. KAR Auction Services will pay the entire cost of preparing, assembling, printing, mailing and
distributing these proxy materials. In addition to the distribution of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and
employees, who will not receive any additional compensation for such solicitation activities. The Company also may reimburse brokerage firms and other persons representing beneficial owners of shares of KAR Auction Services' common stock for their
expenses in forwarding solicitation material to such beneficial owners.
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Q:
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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?
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A:
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The Company has adopted a procedure called "householding" which the SEC has approved. Under this procedure, the Company is delivering a single copy of this proxy statement and the Company's Annual Report to multiple stockholders who share the same
address unless the Company has received contrary instructions from one or more of the stockholders. This procedure reduces the Company's costs and reduces our impact on the environment. Stockholders who participate in householding will continue to be
able to access and receive separate proxy cards. Upon written or oral request, a separate copy of this proxy statement and the Company's Annual Report will be promptly delivered to any stockholder at a shared address to which the Company delivered a
single copy of any of these documents. If you prefer to receive separate copies of the proxy statement or Annual Report, contact Broadridge Financial Solutions, Inc. by calling 1-866-540-7095 or in writing at 51 Mercedes Way, Edgewood, New York
11717, Attention: Householding Department.
In addition, if you currently are a stockholder who shares an address with another stockholder and would like to receive only one
copy of future notices and proxy materials for your household, you may notify your broker if your shares are held in a brokerage account or you may notify us if you hold registered shares. Registered stockholders may notify us by contacting
Broadridge Financial Solutions, Inc. at the above telephone number or address.
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Q:
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Why did I receive a notice regarding the internet availability of the proxy materials instead of a paper copy of the proxy materials?
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A:
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We are making the proxy materials available to stockholders electronically via the Internet under the Notice and Access regulations of the SEC. Most of our stockholders will receive a Notice of Electronic Availability in
lieu of receiving a full set of proxy materials in the mail. The notice includes information on how to access and review the proxy materials, and how to vote via the Internet. We believe this method of delivery will decrease costs, expedite
distribution of proxy materials to you, and reduce our impact on the environment. Stockholders who receive a notice but would like to receive a printed copy of the proxy materials in the mail should follow the instructions in the notice for
requesting such materials.
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Q:
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How can I obtain a copy of KAR Auction Services' Annual Report on Form 10-K?
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A:
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Copies of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC, are available to stockholders free of charge on KAR Auction Services' website at
www.karauctionservices.com
or by writing to KAR Auction Services, Inc., Investor Relations, 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032.
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Q:
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Where can I find the voting results of the annual meeting?
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A:
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KAR Auction Services will announce preliminary voting results at the annual meeting and publish preliminary, or final results if available, in a Current Report on Form 8-K within four business days of the annual
meeting.
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ANNEX I
AMENDED
AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KAR
AUCTION SERVICES, INC.
The
undersigned, Rebecca C. Polak, certifies that she is the Executive Vice President
and
,
General Counsel
and 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 original
Certificate of
Incorporation
certificate 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 of
At
a meeting of the Board of Directors of the Corporation (the "Board of
Directors")
on February 10, 2016
, the Board of Directors
has, by unanimous written consent dated December 9, 2009,
authorized the amendment and restatement of the
Corporation's Original
Certificate of Incorporation as set forth
herein in accordance with
the provisions of
Sections
141(f),
242 and 245 of the General
Corporation Law of the State of Delaware.
In lieu of a
At the annual
meeting
and vote of
the
of 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 the
Corporation's Original
Certificate 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 Incorporation
restates and integrates and
further amends
and
restates
the
Original
Certificate of Incorporation
of the Corporation, as heretofore amended or
supplemented
.
The
text of the
Original
Certificate of Incorporation
of the Corporation
is 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").
Table of Contents
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
:
-
(a)
-
Authorized
Capital Stock
. The total number of shares of stock which the Corporation shall have
authority to issue is 500,000,000 of which the Corporation shall have authority to issue 400,000,000 shares of common stock, each having a par value of one cent per share
($0.01) (the "Common Stock"), and 100,000,000 shares of preferred stock, each having a par value of one cent per share ($0.01) (the "Preferred Stock"). The number of authorized
shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of
a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the GCL (or any successor
provision thereto), and no vote of the holders of any of the Common Stock or the Preferred Stock voting separately as a class shall be required therefor.
-
(b)
-
Common
Stock
. The powers, preferences and rights, and the qualifications, limitations and restrictions,
of the Common Stock are as follows:
(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.
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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:
-
(a)
-
The
business and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. In addition to
the powers and authority expressly conferred upon the Board of Directors by applicable law, this Amended and Restated Certificate of Incorporation or the
Bylaws
By-Laws
of the Corporation, the directors are hereby empowered to exercise all such powers and do all
such acts and things as may be exercised or done by the Corporation, subject to the provisions of the GCL and this Amended and Restated Certificate of Incorporation.
-
(b)
-
The
Board of Directors shall consist of not less than two or more than fifteen members, the exact number of which shall be fixed
from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors.
-
(c)
-
Subject
to the terms of any one or more classes or series of Preferred Stock, any vacancy on the Board of Directors that results
from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy
occurring on the Board of Directors may be filled by a majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. The right
of stockholders to fill vacancies on the Board of Directors is hereby specifically denied. Any director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his or her predecessor.
-
(d)
-
Except
as otherwise required by applicable law and
subject
Subject
to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any director or the entire
Board of Directors may be removed from office at any time
, but only for cause, and only
by the affirmative vote of the holders of
shares representing a majority of the votes entitled to be cast by the Voting Stock;
provided
,
however
, that prior to the Trigger Date, a
director may be removed with or without cause, such removal to be by the affirmative vote of the holders of shares representing a majority of the votes entitled to be cast by
the Voting Stock.
at least a majority in voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the
election of directors.
-
(e)
-
Notwithstanding
the foregoing, the election, term, removal and filling of vacancies with respect to directors, if any, elected
separately by the holders of one or more series of Preferred Stock shall not be governed by this Article FIFTH, but rather shall be as provided for in the resolutions adopted
by the Board of Directors creating and establishing such series of Preferred Stock.
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-
(f)
-
In
addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL and this Amended
and Restated Certificate of Incorporation.
-
(g)
-
For
the purposes of this Amended and Restated Certificate
of Incorporation:
(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.
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Table of Contents
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-Laws
of 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.
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Table of Contents
ELEVENTH
:
-
(a)
-
To
the fullest extent permitted by applicable law
(including, without limitation, Section 122(17) of the GCL (or any successor provision), the Corporation, on behalf of itself and its subsidiaries, renounces any
interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time
presented to any of the Equity Sponsors or any of their respective officers, directors, agents, stockholders, members, partners, affiliates and subsidiaries (other than the
Corporation and its subsidiaries), even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or
desire to pursue if granted the opportunity to do so, and, except as set forth in the exception at the end of this sentence, even if the opportunity is presented to any such
person in part or in whole in his capacity as an officer or director of the Corporation, and none of the foregoing persons shall have any duty to communicate or offer such
corporate opportunity to the Corporation and, to the fullest extent permitted by applicable law, shall be liable to the Corporation or any of its subsidiaries for breach of any
fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person pursues or acquires such business opportunity, directs such business
opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries unless,
in the case of any such person who is a director or officer of the Corporation, such business opportunity is expressly offered to such director or officer in writing solely in
his or her capacity as a director or officer of the Corporation. Any person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be
deemed to have notice of and consented to the provisions of this Article ELEVENTH. Neither the alteration, amendment or repeal of this Article ELEVENTH nor the adoption of any
provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article ELEVENTH shall eliminate or reduce the effect of this Article ELEVENTH in
respect of any matter occurring, or any cause of action, suit or claim that, but for this Article ELEVENTH, would accrue or arise, prior to such alteration, amendment, repeal
or adoption. Nothing in this Article ELEVENTH shall in any way alter, modify or otherwise amend any of the provisions of Section 3.8 of the Second Amended and Restated
Limited Liability Company Agreement of KAR Holdings II, LLC.
-
(b)
-
For
purposes of this Article ELEVENTH
only:
(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).
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Table of Contents
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).
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Table of Contents
IN
WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed on its behalf this
9th
day of
December
June
,
2009
2016
.
|
|
|
|
|
|
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|
KAR AUCTION SERVICES, INC.
|
|
|
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|
By:
|
|
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By:
|
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Name:
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Rebecca C. Polak
|
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|
Title:
|
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Executive Vice President
and
General Counsel
,
General Counsel and Secretary
|
*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 08, 2016 KAR AUCTION SERVICES INC Date: June 08, 2016 Time: 9:00 AM EDT 50 West Washington Street You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. 1234567 1234567 Envelope # # of # Sequence # 1 OF 2 12 15 0000283475_1 R1.0.1.25 Broadridge Internal Use Only Job # Sequence # See the reverse side of this notice to obtain proxy materials and voting instructions. KAR AUCTION SERVICES, INC. 13085 HAMILTON CROSSING BLVD. CARMEL, IN 46032 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 1234567 1234567 1234567 234567 Meeting Information Meeting Type: Annual Meeting For holders as of: April 13, 2016 Location: The Conrad Indianapolis Indianapolis, Indiana 46204 B A R C O D E
Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Have the information that is printed in the box marked by the arrow (located on the by the arrow (located on the following page) in the subject line. How To Vote Please Choose One of the Following Voting Methods marked by the arrow available and follow the instructions. Only 0000283475_2 R1.0.1.25 Vote In Person: Many stockholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. Internal Use 1. Combined Document How to View Online: following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET:www.proxyvote.com 2) BY TELEPHONE:1-800-579-1639 3) BY E-MAIL*:sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before May 25, 2016 to facilitate timely delivery.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" PROPOSALS 2 and 3. 1. Election of Directors Nominees Todd F. Bourell To ratify the Audit Committee's appointment of KPMG LLP as the Company's independent registered public accounting firm for 2016. 3. 1A 1B Donna R. Ecton 1C James P. Hallett 1D Mark E. Hill 1E J. Mark Howell 1F Lynn Jolliffe 1G Michael T. Kestner 1H John P. Larson 1I Stephen E. Smith 2. To approve the amendment and restatement of the Company's Amended and Restated Certificate of Incorporation to provide that the Company's Stockholders may remove any director from office, with or without cause, and other ministerial changes. xxxxxxxxxx Job # Sequence # 0000283475_3 R1.0.1.25 Broadridge Internal Use Only xxxxxxxxxx Cusip Envelope # # of # Sequence # B A R C O D E 23456789012 2 2 2 2 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 Voting items
THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS F 123,456,789,012.12345 Envelope # # of # Sequence # 0000283475_4 R1.0.1.25 Broadridge Internal Use Only THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE Job # Sequence # NAME THE COMPANY NAME INC. - COMMON 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS B123,456,789,012.12345 THE COMPANY NAME INC. - CLASS D123,456,789,012.12345 THE COMPANY NAME INC. - CLASS E123,456,789,012.12345 THE COMPANY NAME INC. - 401 K123,456,789,012.12345 Reserved for Broadridge Internal Control Information
If you would like to reduce the costs incurred by our company in mailing proxy 1234567 VOTE BY MAIL 123,456,789,012.12345 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" PROPOSALS 2 and 3. 1. Election of Directors Nominees Todd F. Bourell For 0 0 0 0 0 0 0 0 Yes 0 Against 0 0 0 0 0 0 0 0 No 0 Abstain 0 0 0 0 0 0 0 0 0 1A For 0 For 0 Against 0 Against 0 Abstain 0 Abstain 0 1B Donna R. Ecton 1I Stephen E. Smith 1C James P. Hallett 1D Mark E. Hill 2. To approve the amendment and restatement of the Company's Amended and Restated Certificate of Incorporation to provide that the Company's Stockholders may remove any director from office, with or without cause, and other ministerial changes. 1E J. Mark Howell 1F Lynn Jolliffe 0 0 0 1G Michael T. Kestner 3. To ratify the Audit Committee's appointment of KPMG LLP as the Company's independent registered public accounting firm for 2016. 1H John P. Larson For address change/comments, mark here. (see reverse for instructions) Please indicate if you plan to attend this meeting Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 02 0000000000 1 OF 1 1 2 0000283476_1 R1.0.1.25 SHARES CUSIP # JOB #SEQUENCE # VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 John Sample 234567P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. 1234567 Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. NAME THE COMPANY NAME INC. - COMMON THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D THE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPA N Y NAME INC. - 401 K CONTROL # SHARES123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 x PAGE1 OF 2 KAR AUCTION SERVICES, INC. 13085 HAMILTON CROSSING BLVD. CARMEL, IN 46032 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 8 8 8 1 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 234567 234567 234567 234567
PROXY KAR AUCTION SERVICES, INC. ANNUAL MEETING OF STOCKHOLDERS - JUNE 8, 2016 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Eric M. Loughmiller and Rebecca C. Polak, and each of them, as true and lawful agents and proxies with full power of substitution in each, to attend and represent the undersigned on all matters to come before the Annual Meeting of Stockholders and to vote as designated on the reverse side, all the shares of common stock of KAR Auction Services, Inc., held of record by the undersigned on April 13, 2016, during or at any adjournment or postponement of the Annual Meeting of Stockholders to be held at 9:00 a.m., EDT, at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204 on Wednesday, June 8, 2016. I hereby acknowledge receipt of the Notice of Annual Meeting of Stockholders and the accompanying Proxy Statement, the terms of which are incorporated by reference, and revoke any proxy previously given by me with respect to such meeting. This proxy will be voted as directed, or if no direction is indicated, the proxy holders will vote the shares represented by this proxy "FOR"each of the nominees listed in Proposal 1 and "FOR" Proposals 2 and 3, and in the discretion of the proxy holders on any other matter that may properly come before the meeting. Address change/comments: (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side 0000283476_2 R1.0.1.25