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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

KAR AUCTION SERVICES, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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LOGO

April 23, 2020

Dear Fellow Stockholder:

Thank you for your continued investment in and support of KAR Auction Services, Inc. d/b/a KAR Global ("KAR Global" or the "Company"). You are cordially invited to attend KAR Global's 2020 annual meeting of stockholders, which will be hosted virtually. A virtual meeting provides expanded access, improved communication and cost savings for our stockholders and the Company. You will be able to attend the 2020 annual meeting online, vote your shares electronically and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/KAR2020.

As a KAR Global stockholder, your vote is important. The matters to be acted upon are described in the notice of annual meeting of stockholders and the proxy statement. Even if you are planning to attend the virtual meeting, you are strongly encouraged to vote your shares in advance through one of the methods described in the proxy statement.

2019 was a pivotal year for KAR Global. We completed the spin-off of Insurance Auto Auctions and advanced initiatives key to our core business—including expanding our international footprint with the acquisition of CarsOnTheWeb and continued enhancement of our data analytic capabilities and digital and technology platforms. Operationally, we grew revenue, adjusted EBITDA and gross profit and sold approximately 3.8 million vehicles. We are proud that through share buybacks and dividends, in 2019 we returned approximately $284 million to stockholders and invested approximately $282 million in our business through capital expenditures and strategic acquisitions.

Thank you again for your continued support of KAR Global, our Board of Directors, our employees and our future.

Sincerely,

SIGNATURE

James P. Hallett

Chairman of the Board and
Chief Executive Officer

This proxy statement is dated April 23, 2020 and is first being distributed to stockholders on or about April 23, 2020.


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LOGO

11299 North Illinois Street
Carmel, Indiana 46032

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
     
Date and Time:   9:00 a.m., Eastern Daylight Time, on June 4, 2020
     
Place:   Online at www.virtualshareholdermeeting.com/KAR2020
     
Admission:   To attend the 2020 annual meeting, visit www.virtualshareholdermeeting.com/KAR2020. You will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials.
     
Items of Business:   Proposal No. 1:  To elect each of the nine director nominees to the Board of Directors.

 

 

Proposal No. 2:  To approve, on an advisory basis, executive compensation.

 

 

Proposal No. 3:  To approve an amendment to the KAR Auction Services, Inc. Employee Stock Purchase Plan to increase the total number of shares reserved for issuance under the plan by 1,500,000 shares.

 

 

Proposal No. 4:  To ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2020.

 

 

To transact any other business as may properly come before the meeting or any adjournments or postponements thereof.
     
Record Date:   You are entitled to vote at the 2020 annual meeting and at any adjournments or postponements thereof if you were a stockholder of record at the close of business on April 9, 2020. A list of stockholders entitled to vote at the 2020 annual meeting will be available for examination during ordinary business hours for 10 days prior to the meeting at the address listed above, and the list will also be available online during the meeting.
     
Voting by Proxy:   Whether or not you plan to virtually attend the 2020 annual meeting, please vote at your earliest convenience by following the instructions in the Notice of Internet Availability of Proxy Materials or the proxy card you received in the mail so that your shares can be voted at the 2020 annual meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions on your enclosed proxy card.
     

 

    On Behalf of the Board of Directors,

 

 

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April 23, 2020
Carmel, Indiana

 

Charles S. Coleman
SVP, General Counsel and Secretary


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Notice of Internet Availability of Proxy Materials for the Annual Meeting

The proxy statement for the 2020 annual meeting and the annual report to stockholders for the fiscal year ended December 31, 2019, each of which is being provided to stockholders prior to or concurrently with this notice, are also available to you electronically via the Internet. We encourage you to review all of the important information contained in the proxy materials before voting. To view the proxy statement and annual report to stockholders on the Internet, visit our website, www.karglobal.com, and click on "Investors" and then the "Financials" tab. The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the SEC.

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY   1

ANNUAL MEETING OF STOCKHOLDERS

  1

ITEMS TO BE VOTED ON AT ANNUAL MEETING OF STOCKHOLDERS

  1

BOARD NOMINEES

  2

2019 BUSINESS HIGHLIGHTS

  3

CORPORATE GOVERNANCE HIGHLIGHTS

  4

EXECUTIVE COMPENSATION

  5
PROPOSAL NO. 1: ELECTION OF DIRECTORS   6

DIRECTORS ELECTED ANNUALLY

  6

DIRECTOR INDEPENDENCE

  6

BOARD NOMINATIONS AND DIRECTOR NOMINATION PROCESS

  6

BOARD QUALIFICATIONS AND DIVERSITY

  7

INFORMATION REGARDING THE NOMINEES FOR ELECTION TO THE BOARD

  7
BOARD STRUCTURE AND CORPORATE GOVERNANCE   13

ROLE OF THE BOARD

  13

BOARD LEADERSHIP

  13

EXECUTIVE SESSIONS

  14

BOARD MEETINGS AND ATTENDANCE

  14

BOARD COMMITTEES

  14

BOARD AND COMMITTEE EVALUATION PROCESS

  16

BOARD'S RISK OVERSIGHT

  16

CORPORATE GOVERANCE DOCUMENTS

  18

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

  18

STOCKHOLDER COMMUNICATIONS WITH THE BOARD

  18
DIRECTOR COMPENSATION   19

CASH AND STOCK RETAINERS

  19

DIRECTOR DEFERRED COMPENSATION PLAN

  20

DIRECTOR STOCK OWNERSHIP AND HOLDING GUIDELINES

  20

DIRECTOR COMPENSATION PAID IN 2019

  20

OUTSTANDING DIRECTOR RESTRICTED STOCK AWARDS

  21
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK   22
PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION   24

PROPOSAL

  24
COMPENSATION DISCUSSION AND ANALYSIS   25

OVERVIEW

  25

EXECUTIVE SUMMARY

  27

COMPENSATION PHILOSOPHY AND OBJECTIVES

  29

THE ROLE OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE OFFICERS IN DETERMINING EXECUTIVE COMPENSATION

  29

ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY AND OBJECTIVES

  31

COMPENSATION POLICIES AND OTHER INFORMATION

  40

RESULTS OF SAY ON PAY VOTES AT 2019 ANNUAL MEETING

  41

COMPENSATION COMMITTEE REPORT

  42
ANALYSIS OF RISK IN THE COMPANY'S COMPENSATION STRUCTURE   43
SUMMARY COMPENSATION TABLE FOR 2019   44
GRANTS OF PLAN-BASED AWARDS FOR 2019   45
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2019   46
OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR 2019   48
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL   49

EQUITY-BASED AWARDS—OMNIBUS PLAN

  49

ANNUAL CASH INCENTIVE AWARDS—OMNIBUS PLAN

  50
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE   51

EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS

  54
CEO PAY RATIO   59
PROPOSAL NO. 3: APPROVAL OF AN AMENDMENT TO THE KAR AUCTION SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES RESERVED UNDER THE PLAN BY 1,500,000 SHARES   60

PROPOSAL

  60
PROPOSAL NO. 4: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   63

PROPOSAL

  63

REPORT OF THE AUDIT COMMITTEE

  64

FEES PAID TO KPMG LLP

  65

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  65
RELATED PERSON TRANSACTIONS   66

REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS

  66
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS   67

NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS

  67
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING   68


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PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement before voting. For more complete information regarding KAR Auction Services, Inc.'s (the "Company," "KAR," "KAR Auction Services" or "KAR Global") 2019 performance, please review the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

ANNUAL MEETING OF STOCKHOLDERS
     
Date and Time:   9:00 a.m., Eastern Daylight Time, on June 4, 2020
     
Location:   Online at www.virtualshareholdermeeting.com/KAR2020
     
Record Date:   Stockholders of record as of the close of business on April 9, 2020 are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and for each of the other proposals to be voted on at the 2020 annual meeting of stockholders. On the record date, the Company had 129,167,854 shares of common stock issued and outstanding.
     
NYSE Symbol:   KAR
     
Registrar and
Transfer Agent:
  American Stock Transfer & Trust Company, LLC
     

ITEMS TO BE VOTED ON AT
ANNUAL MEETING OF STOCKHOLDERS

Proposal   Our Board's
Recommendation
  Page
1.   Election of each of the nine director nominees.   FOR
each director nominee
  6
             
2.   Approval, on an advisory basis, of executive compensation.   FOR   24
         
3.   Approval of an amendment to the KAR Auction Services, Inc. Employee Stock Purchase Plan to increase the total number of shares reserved for issuance under the plan by 1,500,000 shares.   FOR   60
         
4.   Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2020.   FOR   63
         


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BOARD NOMINEES (PAGES 7–12)

Name
  Age
  Director
Since

  Independent
  Primary Occupation
  Committee
Membership**

David DiDomenico   50   2019   Yes   Partner of JANA Partners LLC   AC, NCGC
Carmel Galvin   51   2020   Yes   Chief Human Resources Officer and Senior Vice President, People and Places of Autodesk, Inc.   CC, NCGC
James P. Hallett   67   2007   No   Chairman of the Board and Chief Executive Officer of KAR Auction Services, Inc.  
Mark E. Hill   64   2014   Yes   Managing Partner of Collina Ventures, LLC and Chairman and Chief Executive Officer of Lumavate LLC   NCGC (Chair), RC
J. Mark Howell   55   2014   Yes   President and Chief Executive Officer of Conexus Indiana   RC (Chair), AC
Stefan Jacoby   62   2019   Yes   Automotive Industry Consultant   CC, NCGC
Michael T. Kestner*   66   2013   Yes   Building Products and Automotive Industry Consultant   AC (Chair), RC
Mary Ellen Smith   60   2019   Yes   Corporate Vice President of Worldwide Business Operations of Microsoft Corporation   CC, RC
Stephen E. Smith   71   2013   Yes   Automotive Industry Consultant   CC (Chair), AC

*
Lead Independent Director
**
AC=Audit Committee

CC=Compensation Committee

NCGC=Nominating and Corporate Governance Committee

RC=Risk Committee


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2019 BUSINESS HIGHLIGHTS

For the year ended December 31, 2019, the Company again achieved solid financial results. Specific highlights for fiscal 2019 included:

    On June 28, 2019, we successfully completed the previously announced spin-off of our
former salvage auction business, IAA, Inc. ("IAA"), to our stockholders, resulting in KAR
and IAA being two independent, publicly-traded companies (the
"IAA Spin-Off").
   
         

  
    

 

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Operating revenue was up 14% to approximately $2.8 billion (up 7% excluding purchased vehicle sales).

 

 
                

  
    

 

Total vehicles sold rose approximately 9% to approximately 3.8 million units.

 

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Gross profit increased approximately 4% to $1.2 billion.

 

 
                

  
    

 

Through share buybacks and dividends, in 2019 we returned
approximately
$284 million to stockholders and invested
approximately
$282 million in our business through
capital expenditures and strategic acquisitions.

 

 
            

  
    

 

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We achieved net income from continuing operations of $92.4 million.

 

 
                
GRAPHIC   Adjusted EBITDA* rose 1%
to
$510.0 million.


* Adjusted EBITDA is a non-GAAP measure and is defined and reconciled to the most comparable GAAP measure, net income from continuing operations, in our Annual Report on Form 10-K for the year ended December 31, 2019 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—EBITDA and Adjusted EBITDA."
        

 


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CORPORATE GOVERNANCE HIGHLIGHTS (PAGES 13–18)

We are committed to high standards of ethical and business conduct and strong corporate governance practices. This commitment is highlighted by the practices described below as well as the information contained on our website, www.karglobal.com, which can be accessed by clicking on "Investors" and then the "Governance" tab.

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  Annual Elections: Our directors are elected annually for one-year terms.

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Majority Voting: We maintain a majority voting standard for uncontested director elections with a policy for directors to tender their resignation if less than a majority of the votes cast are in their favor.

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Director and Committee Independence: Eight of our nine director nominees are independent, and all committees of our Board of Directors (the "Board") are comprised entirely of independent directors.

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Executive Sessions: Our independent directors meet in executive session at each regularly scheduled Board meeting.

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Lead Independent Director: We have a lead independent director who presides over the executive sessions of the independent directors and serves as the principal liaison between the independent directors and the Company's CEO and Chairman of the Board.

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Gender Diversity: More than twenty percent of our Board is comprised of women.

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Annual Board and Committee Evaluations: The Board and its committees each evaluates its performance each year.

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Robust Equity Ownership Requirements for Non-Employee Directors: The stock ownership guideline for our non-employee directors is five times their annual cash retainer.

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Robust Equity Retention Requirements for Non-Employee Directors: All shares of our common stock granted to non-employee directors must be held for three years after vesting while serving as a director.

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Robust Equity Ownership Requirements for Executive Officers: We have stock ownership guidelines that are applicable to our executive officers. The stock ownership guideline for our CEO is five times his annual base salary and, for the remaining named executive officers, three times annual base salary. Executive officers are required to hold 60% of vested shares, net of taxes, until stock ownership guidelines are met.

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Anti-Hedging and Pledging Policies: Our directors and executive officers are prohibited from hedging or pledging Company stock.

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Annual management and CEO evaluation and succession planning review: Our Board conducts an annual evaluation and review of our CEO and each executive officer's performance, development and succession plan.

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Board Risk Oversight: The Risk Committee assists the Board in its oversight of: (i) the principal business, financial, technology, operational and regulatory risks and other material risks and exposures of the Company; and (ii) the actions, activities and initiatives of the Company to mitigate such risks and exposures. The Risk Committee provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to another committee of the Board (in which case the Risk Committee may maintain oversight over such risks through the receipt of reports from such committees).


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EXECUTIVE COMPENSATION (PAGES 25–58)

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. For more information regarding our named executive officer compensation, see "Compensation Discussion and Analysis" and the compensation tables that follow such section.

WHAT WE DO

Stockholder alignment: We have demonstrated a trend of alignment between our total stockholder return ("TSR") performance and the compensation of our CEO, as shown in the chart on page 28.
Independent Compensation Committee: All of the members of our Compensation Committee are independent under New York Stock Exchange ("NYSE") rules.
Independent compensation consultant: The Compensation Committee retains its own independent compensation consultant to evaluate and review our executive compensation program and practices.
Pay for performance: Our annual incentive program is 100% performance-based and our equity incentive program is heavily performance-based with 75% of our equity awards in the form of performance restricted stock units ("PRSUs").
"Double-trigger" equity vesting: Accelerated vesting of assumed or replaced equity awards upon a change in control of the Company is only permitted if an executive experiences a qualifying termination of employment in connection with or following such change in control.
Maximum payout caps: The Compensation Committee sets maximum amounts that may be payable for annual cash incentive compensation and PRSUs.
Clawback policy: Our clawback policy provides for the recovery and cancellation of incentive compensation of an executive officer in the event we are required to prepare an accounting restatement due to such executive officer's intentional misconduct.
Moderate change in control benefits: Change in control severance benefits are two times base salary and target bonus for our executive officers.
Robust equity ownership requirements: The stock ownership guideline for our CEO is five times his annual base salary, and three times annual base salary for the other named executive officers. Executive officers are required to hold 60% of vested shares, net of taxes, until stock ownership guidelines are met.
Annual compensation risk assessment: Each year we perform an assessment of any risks that could result from our compensation programs and practices.

WHAT WE DON'T DO

Pay dividends on unvested equity awards: Dividend equivalents and cash are accrued on PRSUs and RSUs, respectively, but are only paid out if and to the extent the underlying PRSUs and RSUs vest.
Provide excessive perquisites: We provide a limited number of perquisites that are designed to support a competitive total compensation package.
Guarantee incentive compensation: Our annual incentive program and our PRSU equity awards are entirely performance-based and our executive officers are not guaranteed any minimum levels of payment.
Allow hedging or pledging of the Company's securities: We prohibit hedging, pledging and short sales of Company stock by our directors and executive officers.
Reprice stock options: Stock option exercise prices are set equal to the grant date market price and cannot be repriced or discounted without stockholder approval.
Provide pension benefits or supplemental retirement plans: We do not maintain a defined benefit pension or supplemental retirement plans for our executive officers.


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DIRECTORS ELECTED ANNUALLY

Our Board has nominated the nine individuals named below to stand for election to the Board at the 2020 annual meeting. The Company's directors are elected each year by our stockholders at the annual meeting. We do not have a staggered or classified board. Each director's term will last until the 2021 annual meeting of stockholders and until such director's successor is duly elected and qualified, or such director's earlier death, resignation or removal. Each director nominee must receive the affirmative vote of a majority of the votes cast in the election of directors at the 2020 annual meeting to be elected (i.e., the number of shares voted "FOR" a director nominee must exceed the number of votes cast "AGAINST" such nominee).

DIRECTOR INDEPENDENCE

The Board is responsible for determining the independence of our directors. Under the NYSE listing standards, a director qualifies as independent if the Board affirmatively determines that the director has no material relationship with the Company. While the focus of the inquiry is independence from management, the Board is required to broadly consider all relevant facts and circumstances in making an independence determination. In making independence determinations, the Board complies with NYSE listing standards and considers all relevant facts and circumstances. Based upon its evaluation, our Board has affirmatively determined that the following directors meet the standards of "independence" established by the NYSE: David DiDomenico, Carmel Galvin, Mark E. Hill, J. Mark Howell, Stefan Jacoby, Michael T. Kestner, Mary Ellen Smith and Stephen E. Smith. With respect to the portion of fiscal 2019 during which they served on the Board, the Board also determined that Todd F. Bourell, Donna R. Ecton, Lynn Jolliffe and John P. Larson met the standards of "independence" established by the NYSE. James P. Hallett, our CEO and Chairman of the Board, is not an independent director.

BOARD NOMINATIONS AND DIRECTOR NOMINATION PROCESS

The Board is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between the annual meetings of stockholders. The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommenlding candidates to the Board for Board membership. When formulating its Board membership recommendations, the Nominating and Corporate Governance Committee may also consider advice and recommendations from others, including third-party search firms, current Board members, management, stockholders and other persons, as it deems appropriate. The Nominating and Corporate Governance Committee retained a third-party search firm to assist with identifying, screening and evaluating potential candidates.

The Nominating and Corporate Governance Committee uses a variety of methods to identify and evaluate potential candidates. Consideration of candidates typically involves a series of internal discussions, review of candidate information, and interviews with selected candidates. The Nominating and Corporate Governance Committee will consider the candidate against the criteria it has adopted, as further discussed below, in the context of the Board's then-current composition and the needs of the Board and its committees, and will ultimately recommend qualified candidates for election to the Board. Though the Nominating and Corporate Governance Committee does not have a formal policy regarding consideration of director candidates recommended by stockholders, the Nominating and Corporate Governance Committee generally evaluates such candidates in the same manner by which it evaluates director candidates recommended by other sources.

As detailed in both the Nominating and Corporate Governance Committee Charter and the Corporate Governance Guidelines, director candidates are selected based upon various criteria, including experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board.


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All candidates are considered in light of the needs of the Board with due consideration given to the foregoing criteria. Board members are expected to prepare for, attend and participate in all Board and applicable committee meetings and the Company's annual meetings of stockholders.

In addition, a stockholder may nominate candidates for election as a director, provided that the nominating stockholder follows the procedures set forth in Article II, Section 5 of the Company's Second Amended and Restated By-Laws for nominations by stockholders of persons to serve as directors, including the requirements of timely notice and certain information to be included in such notice. Deadlines for stockholder nominations for next year's annual meeting are included in the "Requirements, Including Deadlines, for Submission of Proxy Proposals" section on page 67.

An employment agreement entered into on February 27, 2012 between the Company and James P. Hallett, the Company's CEO and Chairman of the Board, provides that Mr. Hallett shall be entitled to serve as a member of the Board for so long as the employment agreement is in effect.

BOARD QUALIFICATIONS AND DIVERSITY

The Nominating and Corporate Governance Committee and the Board believe that diversity along multiple dimensions, including opinions, skills, perspectives, personal and professional experiences, and other differentiating characteristics, is an important element of its nomination recommendations. The Nominating and Corporate Governance Committee has not identified any specific minimum qualifications which must be met for a person to be considered as a candidate for director. However, Board candidates are selected based upon various criteria including experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board. Although the Board does not have a formal diversity policy, the Nominating and Corporate Governance Committee and Board review these factors, including diversity of gender, race, ethnicity, age, cultural background and professional experience, in considering candidates for Board membership.

INFORMATION REGARDING THE NOMINEES FOR ELECTION
TO THE BOARD

The following information is furnished with respect to each nominee for election as a director. All of the nominees are currently directors and were elected by the stockholders at last year's annual meeting, except for Mr. DiDomenico, Ms. Galvin and Ms. Smith, who were each elected by the Board to fill vacancies. Mr. DiDomenico was initially identified and recommended to the Nominating and Corporate Governance Committee as a potential nominee by a former non-employee director, and Ms. Galvin and Ms. Smith were each initially identified and recommended to the Nominating and Corporate Governance Committee as a potential nominee by a third-party search firm. Mr. DiDomenico, Ms. Galvin and Ms. Smith were each subsequently recommended by the Nominating and Corporate Governance Committee to the Board for election as a director. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board elected Mr. DiDomenico and Ms. Smith to the Board effective October 16, 2019, and Ms. Galvin to the Board effective February 1, 2020.

Each of the nominees has consented to being named in this proxy statement and to serve as a director if elected. If a nominee is unavailable to stand for election as a director, your proxy holders will have the authority and discretion to vote for another nominee proposed by the Board or the Board may reduce the number of directors to be elected at the 2020 annual meeting. The ages of the nominees are as of the date of the 2020 annual meeting, June 4, 2020.


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David DiDomenico    

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Independent Director
since October 2019
Age: 50

Current Board Committees:
Audit Committee and Nominating and Corporate Governance Committee
Carmel Galvin    

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Independent Director
since February 2020
Age: 51

Current Board Committees:
Compensation Committee and Nominating and Corporate Governance Committee
Career Highlights

Partner of JANA Partners LLC ("JANA"), a registered investment adviser, since September 2010.

Chief Executive Officer and President of Osprey Technology Acquisition Corp. ("Osprey"), a special purpose acquisition company co-sponsored by JANA, since June 2019 and a director of Osprey since July 2019.

Managing Director of New Mountain Capital, LLC, an alternative investment manager, from 2005 to 2010.

Associate Portfolio Manager at Neuberger Berman, Inc., a diversified asset manager, from 2002 to 2005.

Graduate of Harvard College (BA) and Stanford University Graduate School of Business (MBA).


Other Current Public Company Directorships: Director of Osprey since July 2019.

Skills and Qualifications

More than 20 years of investment management and acquisition experience, including managing investment portfolios at various financial firms.

Extensive experience in financial analysis, including evaluating companies' strategies, operations and financial performance, which provides important perspectives and insights.

Highly skilled in engaging and collaborating with management teams to increase shareholder returns.

Extensive experience as an investor in public markets, which adds valuable perspective on institutional investors' approach to company performance, capital allocation and corporate governance.

Career Highlights

Chief Human Resources Officer ("CHRO") and Senior Vice President, People and Places, at Autodesk, Inc., a multinational software corporation, since March 2018.

CHRO and Senior Vice President at Glassdoor, Inc., a job listing platform, from April 2016 to February 2018.

CHRO and Senior Vice President at Advent Software, Inc., an investment management software company, from October 2014 to April 2016.

Vice President of Talent & Culture Development for Deloitte New-venture Accelerator (DNA), from May 2013 to October 2014.

Provided human resources consulting services from January 2011 to April 2013 at Front Arch, Inc. and from September 2009 to December 2011 at Corporate Leadership Council (CLC), Corporate Executive Board.

Managing Director, Global Head of Human Resources at Moody's Analytics (formerly Moody's KMV) from November 2004 to March 2008 and Vice President, Global Head of Human Resources at Barra, Inc. from September 1995 to June 2002.

Graduate of Trinity College Dublin (BA) and University College Dublin (MBS).


Skills and Qualifications

More than 25 years of talent and culture leadership experience with global organizations in the technology and online sectors.

Extensive experience in helping transform global companies, including leading diversity and inclusion, employee engagement and culture management efforts at companies with varied locations, languages and cultures.

Significant experience with executive compensation programs and practices, including working directly with boards and compensations committees on compensation, talent and succession planning initiatives.

Provides diverse international perspective.


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James P. Hallett    

GRAPHIC

 

Director
since April 2007
Age: 67

Chairman of the Board and Chief Executive Officer
Mark E. Hill    

GRAPHIC

 

Independent Director
since June 2014
Age: 64

Current Board Committees:
Nominating and Corporate Governance Committee (Chair) and Risk Committee
Career Highlights

Chairman of the Company since December 2014 and Chief Executive Officer since September 2009.

Chief Executive Officer and President of ADESA from April 2007 to September 2009, a wholly owned subsidiary of the Company.

President of Columbus Fair Auto Auction, a large independent automobile auction located in Columbus, Ohio, from May 2005 to April 2007.

After selling his auctions to ADESA in 1996, Mr. Hallett held various senior executive leadership positions with ADESA between 1996 and 2005, including President and Chief Executive Officer of ADESA.

Founded and owned two automobile auctions in Canada from 1990 to 1996.

Graduate of Algonquin College.

Managed and then owned a number of new car franchise dealerships for 15 years.

Winner of multiple industry awards, including NAAA Pioneer of the Year in 2008 and the Ed Bobit Industry Icon award in 2018.

Recognized as the EY Entrepreneur of the Year 2014 National Services Award Winner and one of Northwood University's 2015 Outstanding Business Leaders.


Skills and Qualifications

Committed and deeply engaged leader with over 20 years of experience in key leadership roles throughout the Company and over 40 years of experience in the industry.

As Chief Executive Officer, Mr. Hallett has a thorough and in-depth understanding of the Company's business and industry, including its employees, business units, customers and investors, which provides an additional perspective to our Board.

Utilizes strong communication skills to guide Board discussions and keep our Board apprised of significant developments in our business and industry; including our risk management practices, strategic planning and development.

Career Highlights

Managing Partner of Collina Ventures, LLC, a private investment company that invests in software and technology companies, since 2006; and Chairman and Chief Executive Officer of Lumavate LLC, a company that provides a platform for building cloud-based mobile applications, since November 2017.

Co-founder and Chairman of Bluelock, LLC, a privately held infrastructure-as-a-service company, from 2006 to March 2018.

Co-Founder, President and Chief Executive Officer of Baker Hill Corporation, a banking industry software and services business, from 1985 to 2006. Baker Hill Corporation was acquired by Experian PLC, a global information solutions company, in 2005.

Graduate of the University of Notre Dame (BBA) and Indiana University (MBA).


Other Public Company Directorships in Last Five Years: Director of Interactive Intelligence Group, Inc. from 2004 to 2016.

Skills and Qualifications

Significant executive leadership and management experience leading and owning a software and technology-based business provides our Board with expertise in technology, innovation, and strategic investments.

Extensive experience as an investor and mentor to numerous early stage software and technology companies provides entrepreneurial perspective to the Board.

Key leadership experience in numerous central Indiana business and community service organizations, including TechPoint, the Central Indiana Community Foundation, the Orr Fellowship and the local Teach For America board.

Public company board experience, including serving as a lead independent director.


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J. Mark Howell    

GRAPHIC

 

Independent Director
since December 2014
Age: 55

Current Board Committees:
Risk Committee (Chair) and Audit Committee
Stefan Jacoby    

GRAPHIC

 

Independent Director
Since June 2019
Age: 62

Current Board Committees:
Compensation Committee and Nominating and Corporate Governance Committee
Career Highlights

President and Chief Executive Officer of Conexus Indiana, Indiana's advanced manufacturing and logistics initiative sponsored by Central Indiana Corporate Partnership, Inc., since January 2018.

Chief Operating Officer of Angie's List, Inc., a national local services consumer review service and marketplace, from March 2013 to September 2017. Angie's List, Inc. was acquired in 2017 and merged into ANGI Homeservices Inc.

President, Ingram Micro North America Mobility of Ingram Micro Inc., a technology distribution company, from 2012 to 2013.

President, BrightPoint Americas of BrightPoint, Inc., a distributor of mobile devices for phone companies, including Chief Operating Officer, Executive Vice President and Chief Financial Officer, from 1994 to 2012. BrightPoint, Inc. was sold to Ingram Micro Inc. in 2012.

Vice President and Corporate Controller of ADESA from August 1992 to July 1994, now a wholly owned subsidiary of the Company.

Audit Staff and Senior Staff at Ernst & Young LLP.

Graduate of the University of Notre Dame (BBA in Accounting).


Skills and Qualifications

Extensive senior leadership experience at internet-based and technology-driven companies provides valuable insight as an increasing amount of the Company's consigned vehicles are sold online.

Significant executive leadership experience in the public company sector.

Provides unique, in-depth knowledge of ADESA and its industry as a former employee of ADESA.

Substantial financial experience.

Certified Public Accountant with experience in public accounting and public companies.

Career Highlights

Consultant in the automotive industry since January 2018.

Executive Vice President of General Motors Company, a multinational company that designs, manufactures and markets vehicles worldwide, and President of GM International Operations, from August 2013 to January 2018.

Chief Executive Officer and President of Volvo Car Corporation, a multinational vehicle manufacturer and marketer, from August 2010 to October 2012.

Served in several capacities at Volkswagen AG, a multinational automotive manufacturing company, between 2004 and 2010, most recently serving as Chief Executive Officer and President of Volkswagen Group of America from 2007 to 2010 and as Executive Vice President of Group Marketing and Sales at Volkswagen AG from 2004 to 2007.

Chief Executive Officer and President of Mitsubishi Motors Europe, the European headquarters of automotive manufacturer Mitsubishi Motors, from 2001 to 2004.

Served in a variety of finance and leadership roles at Volkswagen AG from 1985 to 2001.

Graduate of the University of Cologne, Germany.


Skills and Qualifications

More than 30 years of broad international experience in the automotive industry, including senior management positions with global automakers in Germany, Japan, the Netherlands, Sweden, Singapore and the United States.

Deep insights and understanding of the macro trends and technologies rapidly transforming the automotive industry, including mobility as a service and autonomous vehicles.

Extensive knowledge of customer experience and retail structures. Expansive experience in finance, sales and marketing has given him a deep understanding of the impact of both areas on profitability and successful market growth.

Strong leadership skills in managing and motivating people for establishing momentum for growth and change, building high performance teams in transformative periods and recruiting and retaining senior management.


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Michael T. Kestner    

GRAPHIC

 

Independent Director
since December 2013
Lead Independent Director
since July 2019
Age: 66

Current Board Committees:
Audit Committee (Chair) and Risk Committee
Mary Ellen Smith    

GRAPHIC

 

Independent Director
since October 2019
Age: 60

Current Board Committees:
Compensation Committee and Risk Committee
Career Highlights

Consultant in the building products and automotive industry since December 2015.

Chief Financial Officer of Building Materials Holding Corporation, a building products company, from August 2013 to December 2015.

Partner in FocusCFO,  LLC, a consulting firm providing part time CFO services, from April 2012 to August 2013.

Executive Vice President, Chief Financial Officer and a director of Hilite International, Inc., an automotive supplier of powertrain parts, from October 1998 to July 2011.

Chief Financial Officer of Sinter Metals, Inc., a supplier of powder metal precision components, from 1995 to 1998.

Served in various capacities at Banc One Capital Partners, Wolfensohn Ventures LP and as a senior audit manager at KPMG LLP.

Graduated from Southeast Missouri State University.


Skills and Qualifications

Over 20 years as a CFO provides valuable experience and perspective as Chair of the Audit Committee.

Brings experience as the former CFO of a large, United States based company which includes experience with complex capital structures and mergers and acquisitions.

Extensive experience in financial analysis and financial statement preparation.

Management experience in the automotive industry both domestically and internationally provides him with additional insight into financial and business matters that are important to the Company.

Certified Public Accountant with experience in public accounting and public companies.

Career Highlights

Corporate Vice President of Worldwide Business Operations of Microsoft Corporation ("Microsoft"), a technology company, since July 2013.

Vice President, Worldwide Operations of Microsoft from 2011 to July 2013, General Manager, Worldwide Commercial Operations of Microsoft from 2010 to 2011, and General Manager and President of Microsoft Licensing, GP from 2006 to 2010.

Served in several roles at Hewlett-Packard Company from 1996 to 2006, including Vice President, Volume Direct and Teleweb, Americas Region, from 2004 to 2006, and Vice President, Worldwide Customer Operations from 2002 to 2004.

Graduate of Bowling Green State University (BS) and Wright State University (MBA). Earned certificate of completion from the Stanford Executive Program at Stanford University.


Skills and Qualifications

Over 30 years of broad and extensive operational and leadership experience in the technology industry with a deep focus on global operations strategy and execution, business transformation change management, global manufacturing, supply chain and logistics.

Deep expertise in digital business transformation, change management in transforming business processes from physical to digital supply chain and operations delivering highly impactful business model and cost improvements.

Extensive knowledge in leading through growth and expansion by building future operating performance models for new businesses in emerging markets and more broadly, worldwide.

Extensive knowledge and broad business skills supporting customer experience enhancements, compliance enhancements, oversight, risk mitigation and management. Highly skilled in finance, sales and marketing support with a deep understanding of business model operations and drivers of profitability.

Significant leadership skills leading highly impactful and performing teams and managing people. A proven leader championing diversity and inclusion in corporate culture for all dimensions of diversity.


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Stephen E. Smith            

GRAPHIC

 

Independent Director
since December 2013
Age: 71

Current Board Committees:
Compensation Committee (Chair) and Audit Committee

 

 

 

 

Career Highlights

 

 

 

 


Consultant in the automotive industry since October 2012.


 

 

 

 

Senior Vice President, Financial Services of American Honda Finance Corporation (AHFC), a provider of financial services to automobile, motorcycle, marine and power equipment product dealers and their customers, from 1985 to October 2012 (including various other positions). Financial services included commercial lending, consumer lending and financing and vehicle service contracts. Started the consumer finance organization at AHFC.

       


Served two terms as Chair of the Vehicle Finance Division for the American Financial Services Association. Member of the Financial Services Roundtable.


 

 

 

 


Began career at Bullock's Dept. Stores, a division of Federated Department Stores. Held senior level positions in the credit card division and in store management.


 

 

 

 


Member of the board of the directors of Carecredit Corporation, a privately-held consumer credit healthcare company, from 1996 to 2002.


 

 

 

 


Interim President of the California Council on Economic Education, a not-for-profit organization that provides training and educational materials to California teachers relating to economics and personal finance, from July 2013 to February 2014.


 

 

 

 


Graduated from California State University, Northridge (BA, MBA).


 

 

 

 

Skills and Qualifications

 

 

 

 


Over 25 years of extensive operational and management experience in the automotive industry with particular insight into the financing and leasing of vehicles.


 

 

 

 


Significant expertise in creating, building and developing consumer and commercial finance business. Expertise in strategy development, sales and marketing, operating efficiency and performance improvement, customer satisfaction and loyalty, and talent management.


 

 

 

 


Extensive experience in managing lease residual setting, vehicle remarketing, dealer inventory financing and vehicle service contracts.


 

 

 

 


Considerable financial skill and expertise.


 

 

 

 

 

  The Board of Directors recommends a vote "FOR" the election of each of the foregoing nine nominees to the Board of Directors.

 

 

 
    Proxies solicited by the Board of Directors will be voted "FOR" the election of each of the nine director nominees named in this proxy statement and on the proxy card unless stockholders specify a contrary vote.


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BOARD STRUCTURE AND CORPORATE GOVERNANCE

ROLE OF THE BOARD

The Board oversees the Company's CEO and other senior management in the competent and ethical operation of the Company and assures that the long-term interests of the stockholders are being served. The Board serves as the ultimate decision-making body of the Company, except for those matters reserved to or shared with the stockholders. The Company's Corporate Governance Guidelines are available on our website, www.karglobal.com, by clicking on "Investors" and then the "Governance" tab. The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the Securities and Exchange Commission (the "SEC").

BOARD LEADERSHIP

Neither the Company's Second Amended and Restated By-Laws nor the Company's Corporate Governance Guidelines require that the Company separate the roles of Chairman of the Board and CEO, and the Board does not have a policy on whether the same person should serve as both the CEO and Chairman of the Board, or if the roles must remain separate. The Board believes that it should have the flexibility to make these determinations from time to time in the way that it believes best to provide appropriate leadership for the Company under then-existing circumstances.

At present, the Board has chosen to combine the positions of CEO and Chairman of the Board and to appoint a Lead Independent Director. Our Board believes that having one person serve the combined role of CEO and Chairman of the Board is appropriate for the Company at this time, as it fosters clear accountability, effective decision making and alignment on corporate strategy. Given Mr. Hallett's unparalleled knowledge of the industry and the Company, the Board believes Mr. Hallett is in the best position to focus the independent directors' attention on critical business matters and to speak for and lead both the Company and the Board. In addition, the Board believes that the appointment of a Lead Independent Director helps ensure that the Company benefits from effective oversight by its independent directors. Our Lead Independent Director presides over the executive sessions of the independent directors and serves as the principal liaison between the independent directors and the Company's CEO and Chairman of the Board. Our Lead Independent Director, Mr. Kestner, has served on the Board since 2013 and as Lead Independent Director since July 2019. Mr. Kestner is a highly-engaged Lead Independent Director empowered with robust authority and responsibilities, as discussed below.

The Board has adopted a Lead Independent Director Charter, which sets forth a clear mandate with significant authority and responsibilities for the Lead Independent Director, including:

Board Meetings and Executive Sessions  

Has the authority to call meetings of the independent directors, and calls and develops the agenda for executive sessions of the independent directors.

   

Presides at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors.

Meeting Agendas, Schedules and Materials  

Reviews, in consultation with the Chairman and CEO:

agendas for Board meetings;

   

meeting schedules to assure there is sufficient time for discussion of all agenda items; and

   

information sent to the Board, including the quality, quantity, appropriateness and timeliness of such information.

Board/Director Communications  

Serves as principal liaison on Board-wide issues among the independent directors and the Chairman and CEO and facilitates communication generally among directors.

Stockholder Communications  

If requested by stockholders, ensures that he or she is available, when appropriate, for consultation and direct communication.

Chairman and CEO Performance Evaluation  

Together with the Compensation Committee, conducts an annual evaluation of the Chairman and CEO, including an annual evaluation of his or her interactions with the independent directors.

Outside Advisors and Consultants  

Recommends to the independent directors the retention of advisors and consultants who report directly to the Board, and, upon approval by the independent directors, retains such advisors and consultants.


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EXECUTIVE SESSIONS

The independent directors of the Company meet in executive session at every regularly scheduled Board meeting. The Company's Corporate Governance Guidelines state that the Chairman of the Board (if an independent director) or the Lead Independent Director (if the Chairman of the Board is not an independent director) shall preside at such executive sessions, or in such director's absence, another independent director designated by the Chairman of the Board or the Lead Independent Director, as applicable. Currently, Mr. Kestner, our Lead Independent Director, presides at the executive sessions of our independent directors.

BOARD MEETINGS AND ATTENDANCE

The Board held thirteen meetings during 2019. All of the incumbent directors attended at least 75% of the meetings of the Board and Board committees on which they served during 2019. As stated in our Corporate Governance Guidelines, each director is expected to attend all annual meetings of stockholders. All of our directors attended last year's annual meeting of stockholders.

BOARD COMMITTEES

In 2019, the Board maintained four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Risk Committee. Each of our committees operates pursuant to a written charter. Copies of the committee charters are available on our website, www.karglobal.com, by clicking on "Investors" and then the "Governance" tab. The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the SEC. The following table sets forth the current membership of each committee:

Name   Audit Committee   Compensation
Committee
  Nominating and
Corporate
Governance
Committee
  Risk Committee
David DiDomenico   GRAPHIC     GRAPHIC  
Carmel Galvin       GRAPHIC   GRAPHIC    
James P. Hallett*                
Mark E. Hill                        GRAPHIC  (Chair)   GRAPHIC
J. Mark Howell   GRAPHIC                    GRAPHIC  (Chair)
Stefan Jacoby       GRAPHIC   GRAPHIC    
Michael T. Kestner**                GRAPHIC  (Chair)       GRAPHIC
Mary Ellen Smith       GRAPHIC       GRAPHIC
Stephen E. Smith   GRAPHIC                GRAPHIC  (Chair)    

* Chief Executive Officer and Chairman of the Board
** Lead Independent Director

A description of each Board committee is set forth below.

Audit Committee

Meetings Held in 2019: 7

Primary Responsibilities: Our Audit Committee assists the Board in its oversight of the integrity of our financial statements, our independent registered public accounting firm's qualifications and independence and the performance of our independent registered public accounting firm. The Audit Committee (i) reviews the audit plans and findings of our independent registered public accounting firm and our internal audit team and tracks management's corrective action plans where necessary; (ii) reviews our financial statements, including any significant financial items and changes in accounting policies or practices, with our senior management and independent registered public accounting firm; (iii) reviews our financial risk and control procedures, compliance programs (including our Code of Business Conduct and Ethics) and significant tax, legal and regulatory


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matters; (iv) reviews and approves related person transactions; and (v) has the sole discretion to appoint annually our independent registered public accounting firm, evaluate its independence and performance and set clear hiring policies for employees or former employees of the independent registered public accounting firm.

Independence: Each member of the Audit Committee is "financially literate" under the rules of the NYSE, and each of Messrs. Howell and Kestner has been designated as an "audit committee financial expert" as that term is defined by the SEC. In addition, the Board has determined that each member of the Audit Committee meets the standards of "independence" established by the NYSE and is "independent" under the independence standards for audit committee members adopted by the SEC.

Compensation Committee

Meetings Held in 2019: 13

Primary Responsibilities: The Compensation Committee reviews and recommends policies relating to the compensation and benefits of our executive officers and employees. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of our CEO and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and approves the compensation of these officers based on such evaluations. The Compensation Committee also administers the issuance of equity and other awards under our equity plans.

Independence: All of the members of the Compensation Committee are independent under the NYSE rules (including the enhanced independence requirements for compensation committee members).

Nominating and Corporate Governance Committee

Meetings Held in 2019: 7

Primary Responsibilities: The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board regarding candidates for directorships and the size and composition of the Board. The Nominating and Corporate Governance Committee also reviews non-employee director compensation on an annual basis and makes recommendations to the Board. In addition, the Nominating and Corporate Governance Committee is responsible for overseeing our Corporate Governance Guidelines and reporting and making recommendations to the Board concerning governance matters. As required by the Company's Corporate Governance Guidelines, the Nominating and Corporate Governance Committee oversees an annual evaluation process of the Board and each committee of the Board, as discussed in more detail under "Board and Committee Evaluation Process" below.

Independence: All of the members of the Nominating and Corporate Governance Committee are independent under the NYSE rules.

Risk Committee

Meetings Held in 2019: 4

Primary Responsibilities: The Risk Committee assists the Board in its oversight of (i) the principal business, financial, technology, operational and regulatory risks, and other material risks and exposures of the Company and (ii) the actions, activities and initiatives of the Company to mitigate such risks and exposures. The Risk Committee also provides oversight for matters specifically relating to cyber security and other risks related to information technology systems and procedures. The Risk Committee receives regular reports from the Company's Chief Information Security Officer on, among other things, the Company's cyber risks and threats, the status of projects to strengthen the Company's information security systems, assessments of the Company's security program and the emerging threat landscape. The Risk Committee also oversees the Company's enterprise risk management ("ERM") program and has direct oversight over certain risks within the ERM framework.

Independence: All of the members of the Risk Committee are independent under the NYSE rules.


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BOARD AND COMMITTEE EVALUATION PROCESS

The Nominating and Corporate Governance Committee oversees the annual evaluation process of the Board and each of its committees. The evaluation process includes a self-evaluation by the Board, a self-evaluation by each committee of the Board, and a peer evaluation by each director of each other Board member. Once the evaluation process is complete, the Nominating and Corporate Governance Committee reports to the full Board the results, including any recommendations, which are discussed by the full Board and each committee, as applicable, and changes in practices or procedures are considered and implemented as appropriate.

The Nominating and Corporate Governance Committee periodically reviews the format of the evaluation process to ensure that actionable feedback is solicited on the operation and effectiveness of the Board, the Board committees and each Board member. The Nominating and Corporate Governance Committee also utilizes the results of this self-evaluation process in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board and making recommendations to the Board with respect to assignments of Board members to various committees.

BOARD'S RISK OVERSIGHT

Management is responsible for assessing and managing risk at the Company, including communicating the most material risks to the Board and its committees. The Board has primary responsibility for risk oversight, with a focus on the most significant risks facing the Company. Oversight of the Company's risks is carried out by the Board as a whole and by each of its committees.

The Board's leadership structure, through its committees, supports its role in risk oversight. In general, the committees oversee the following risks:

Audit Committee: The Audit Committee maintains initial oversight over risks related to (i) the integrity of the Company's financial statements; (ii) internal control over financial reporting and disclosure controls and procedures (including the performance of the Company's internal audit function); (iii) the performance of the independent registered public accounting firm; and (iv) ethics and related issues arising from the Company's whistleblower hotline.

Compensation Committee: The Compensation Committee maintains oversight over risks related to the Company's compensation programs and practices.

Nominating and Corporate Governance Committee: The Nominating and Corporate Governance Committee monitors potential risks relating to the effectiveness of the Board, notably director succession, composition of the Board and the principal policies that guide the Company's governance.

Risk Committee: The Risk Committee maintains oversight over the Company's enterprise-level risks, including with respect to cyber security and information technology systems and procedures as noted above. The Risk Committee provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to another committee of the Board. Even when the oversight of a specific area of risk has been delegated to another committee, the Risk Committee may maintain oversight over such risks through the receipt of reports from the committee chairs.

The Board maintains oversight over such risks through the receipt of reports from the committee chairs at each regularly scheduled Board meeting.

As part of the risk management process, an annual risk assessment is conducted by management to identify and prioritize the most significant enterprise risks to the Company. This risk assessment is reviewed with the Risk Committee and helps guide the focus and selection of risks that are brought to the Risk Committee for review or covered by the full Board or its other committees. The reviews by the Risk Committee and other committees occur principally through the receipt of reports from management and third parties on applicable areas of risk, and discussions with management and third parties regarding risk assessment and risk management.


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At its regularly scheduled meetings, the Board generally receives a number of reports which include information relating to risks faced by the Company. The Company's Chief Financial Officer provides a report on the Company's results of operations, its liquidity position, including an analysis of prospective sources and uses of funds, and the implications to the Company's debt covenants and credit rating, if any. The Company's General Counsel provides a privileged report which provides information regarding the status of the Company's material litigation and related matters, if any, including environmental updates and the Company's continuing compliance with applicable laws and regulations. Further, the president of each primary business unit provides information relating to strategic, operational and competitive risks. At each regularly scheduled Board meeting, the Board also receives reports from the Chairman of the Risk Committee as well as other committee chairs, which may include a discussion of risks initially overseen by the committees for discussion and input from the Board. As noted above, in addition to these regular reports, the Risk Committee receives reports on specific areas of risk, such as regulatory, cyclical or other risks, and reports to the Board on these matters.


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CORPORATE GOVERNANCE DOCUMENTS

The Board has adopted the following corporate governance documents:

Document   Purpose/Application
Code of Business Conduct and Ethics   Applies to all of the Company's employees, officers and directors, including those officers responsible for financial reporting.
Code of Ethics for Principal Executive and Senior Financial Officers   Applies to the Company's principal executive officer, principal financial and accounting officer and such other persons who are designated by the Board.
Corporate Governance Guidelines   Contains general principles regarding the functions of the Board and its committees.
Committee Charters   Apply to the following Board committees, as applicable: Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee.
Lead Independent Director Charter   Sets forth a clear mandate and significant authority and responsibilities for the Lead Independent Director.

We expect that any amendment to or waiver of the codes of ethics that apply to executive officers or directors will be disclosed on the Company's website. The foregoing documents are available on our website, www.karglobal.com, by clicking on "Investors" and then the "Governance" tab and in print to any stockholder who requests them. Requests should be made to KAR Auction Services, Inc., Investor Relations, 11299 North Illinois Street, Carmel, Indiana 46032.

COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION

During fiscal year 2019, each of Messrs. Bourell, Jacoby, Kestner, Larson, Smith and Mmes. Ecton, Jolliffe and Smith served as members of the Compensation Committee. None of our executive officers serve, or in fiscal year 2019 served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or our Compensation Committee. None of the individuals serving as members of the Compensation Committee during fiscal year 2019 are now or were previously an officer or employee of the Company or its subsidiaries.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD

Any stockholder or other interested parties desiring to communicate with the Board, the Chairman of the Board, a committee of the Board or any of the independent directors individually or as a group regarding the Company may directly contact such directors by delivering such correspondence to the Company's General Counsel at KAR Auction Services, Inc., 11299 North Illinois Street, Carmel, Indiana 46032. Our General Counsel reviews all such correspondence and forwards to the applicable director(s) copies of all such applicable correspondence.

The Audit Committee has established procedures for employees, stockholders and others to submit confidential and anonymous reports regarding accounting, internal accounting controls, auditing or any other relevant matters.


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DIRECTOR COMPENSATION

We use a combination of cash and stock based incentive compensation to attract and retain independent, qualified candidates to serve on the Board. The Board makes all director compensation determinations after considering the recommendations of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee reviews director compensation annually, assisted periodically by an independent compensation consultant (most recently by ClearBridge Compensation Group LLC ("ClearBridge") in October 2018).

In setting director compensation, we consider various factors including market comparison studies and trends (such as ClearBridge's review in October 2018), the responsibilities of directors generally, including committee chairs, and the significant amount of time that directors expend in fulfilling their duties. In establishing the non-employee director compensation recommendations, the Nominating and Corporate Governance Committee utilized a balance of cash and equity, with the majority of the compensation delivered through equity grants. Directors who also serve as employees of the Company do not receive payment for service as directors.

Based in part on ClearBridge's October 2018 review of our director compensation program and those of the Company's then-current proxy comparator group (which is also used in executive compensation benchmarking), in October 2018 the Nominating and Corporate Governance Committee recommended, and the Board approved, certain changes to our director compensation program effective in 2019. Based on its most recent review, the Nominating and Corporate Governance Committee recommended, and the Board agreed, that no additional changes should be made to director compensation for 2020. There have been no increases in compensation paid to our directors since those approved in October 2018.

On March 26, 2020, the Company announced that in connection with the ongoing COVID-19 pandemic, each of our non-employee directors voluntarily elected to forgo one-fourth of his or her annual cash retainer and applicable chair, membership and lead independent director fees, which was each to be paid at the end of the second quarter 2020.

CASH AND STOCK RETAINERS

Non-employee directors who served for the entirety of 2019 received:

Components of Director Compensation Program
For 2019 Service

  Annual Amount
  Form of Payment(1)
Annual Cash Retainer(2)   $85,000   Cash
Annual Stock Retainer(3)   $130,000   Restricted Stock
Lead Independent Director Fee   $30,000   Cash
Audit Committee Chair Fee   $25,000   Cash
Compensation Committee Chair Fee   $20,000   Cash
Nominating and Corporate Governance and Risk Committee Chair Fee   $10,000   Cash
Audit Committee Membership Fee   $7,500   Cash

(1)
May elect to receive annual cash retainer in shares of our common stock.

(2)
One-fourth of the annual cash retainer is paid at the end of each quarter, provided that the director served as a director in such fiscal quarter.

(3)
Pursuant to our Policy on Granting Equity Awards, unless specifically provided otherwise by the Compensation Committee or the Board, annual grants for directors are effective on the date of the annual meeting at which the director was elected or re-elected. The annual restricted stock grant vests after one year (i.e., on the anniversary of the annual meeting), and is subject to forfeiture until vested. The number of shares of our common stock received is based on the value of the shares on the date of the restricted stock grant.

Annual cash and stock retainers and any applicable fees described above are prorated for non-employee directors who begin such service on a date other than the date of the Company's annual meeting of stockholders. Directors do not receive fees for attending Board or committee meetings. All of our directors are reimbursed for reasonable expenses incurred in connection with attending Board meetings, committee meetings and director education events.


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DIRECTOR DEFERRED COMPENSATION PLAN

Our Board adopted the KAR Auction Services, Inc. Directors Deferred Compensation Plan (the "Director Deferred Compensation Plan") in December 2009. Pursuant to the terms of the Director Deferred Compensation Plan, each non-employee director may elect to defer the receipt of his or her cash director fees into a pre-tax interest-bearing deferred compensation account, which account accrues interest as described in the Director Deferred Compensation Plan. Amounts under the Director Deferred Compensation Plan may also be invested in the same investment choices as are available under our 401(k) plan. Non-employee directors also may choose to receive all or a portion of their annual stock retainer in the form of a deferred share account that tracks shares of our common stock. The Director Deferred Compensation Plan provides that the amount of cash in a director's deferred cash account, plus the number of shares of our common stock equal to the number of shares in the director's deferred share account, will be delivered to a director in installments over a specified period or within 60 days following the date of the director's departure from the Board, with cash being paid in lieu of any fractional shares.

DIRECTOR STOCK OWNERSHIP AND HOLDING GUIDELINES

The Company's non-employee directors are subject to the Company's director stock ownership and holding guidelines. The stock holding guideline requires each non-employee director to hold any shares of the Company's common stock granted by the Company for at least three years post-vesting while serving as a director, subject to certain exceptions approved by the Nominating and Corporate Governance Committee.

The Company's stock ownership guideline requires each non-employee director to own a minimum of five times his or her annual cash retainer amount in shares of Company stock. All non-employee directors with more than one year of service are in compliance with this stock ownership guideline, except for Messrs. Howell and Smith due to the decrease in our stock price following the IAA Spin-Off.

DIRECTOR COMPENSATION PAID IN 2019

The following table provides information regarding the fiscal 2019 compensation paid to our non-employee directors:

Name                    
  Fees Earned
or Paid in
Cash(1)
  Stock
Awards(2)
  Total
Todd F. Bourell(3)   $36,429     $36,429
David DiDomenico(4)   $19,425   $82,539   $101,964
Donna R. Ecton(3)   $56,250   $130,031   $186,281
Mark E. Hill   $95,000   $130,031   $225,031
J. Mark Howell   $102,500   $130,031   $232,531
Stefan Jacoby   $48,805   $130,031   $178,836
Lynn Jolliffe(3)   $42,500   $130,031   $172,531
Michael T. Kestner   $125,000   $130,031   $255,031
John P. Larson(3)   $57,500   $130,031   $187,531
Mary Ellen Smith(4)   $17,850   $82,539   $100,389
Stephen E. Smith   $101,000   $130,031   $231,031

(1)
The amounts represent the $85,000 annual cash retainer paid to each non-employee director, plus an additional $30,000 paid to the Lead Independent Director, an additional $25,000 paid to the Chairman of the Audit Committee, an additional $20,000 paid to the Chairman of the Compensation Committee, an additional $10,000 paid to the Chairman of the Nominating and Corporate Governance Committee and the Chairman of the Risk Committee, and an additional $7,500 paid to members of the Audit Committee (other than the Chairman).

(2)
The amounts represent the aggregate grant date fair value, computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC 718"), of shares of restricted stock awarded


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to each non-employee director as an annual stock retainer. Each non-employee director who was serving as a director after June 4, 2019, the date of our 2019 annual meeting, received 2,230 shares of restricted stock as an annual stock retainer in June 2019. Mr. DiDomenico and Ms. Smith each received a prorated annual stock retainer grant of 3,839 shares on November 8, 2019. Pursuant to the Director Deferred Compensation Plan, Messrs. Bourell, DiDomenico, Hill, Howell, Jacoby, Kestner, Larson and Smith and Ms. Ecton and Ms. Jolliffe each elected to receive 100% of his or her annual stock retainer in a deferred share account. Ms. Ecton's stock award was subsequently forfeited upon her resignation from the Board on July 1, 2019. Please see "Outstanding Director Restricted Stock Awards" below for the aggregate number of stock awards outstanding at fiscal year-end for each non-employee director.

(3)
Mr. Bourell served as a director until June 4, 2019, the date of our 2019 annual meeting. Mr. Larson and Ms. Jolliffe served as directors until June 27, 2019, and thereafter became directors of IAA in connection with the IAA Spin-Off. Ms. Ecton served as a director until July 1, 2019, and subsequently forfeited her unvested annual stock retainer granted in June 2019.

(4)
Mr. DiDomenico and Ms. Smith joined the Board on October 16, 2019 and received a prorated annual cash retainer and a prorated annual stock retainer.

Mr. Hallett was not entitled to receive any fees or other compensation for serving as a member of our Board in 2019 because he was employed by the Company. Ms. Galvin was not a member of the Board in 2019.

OUTSTANDING DIRECTOR RESTRICTED STOCK AWARDS

The following table sets forth information regarding the number of unvested or deferred shares of our common stock held by each non-employee director as of December 31, 2019:

Name                    
  Unvested Shares
and Dividend
Equivalents(1)
  Deferred Phantom
Shares and
Dividend
Equivalents(2)
Todd F. Bourell(3)    
David DiDomenico   3,839  
Donna R. Ecton(3)     11,009
Carmel Galvin    
Mark E. Hill   5,901   39,219
J. Mark Howell   2,247   12,680
Stefan Jacoby   2,247  
Lynn Jolliffe(3)   2,247   6,612
Michael T. Kestner   4,286   26,833
John P. Larson(3)   2,247   11,018
Mary Ellen Smith   3,839  
Stephen E. Smith   2,247   8,660

(1)
This number represents unvested shares of restricted stock and, for those directors who deferred, unvested phantom stock and dividend equivalents. Directors also received shares of restricted stock or phantom stock in IAA in connection with the IAA Spin-Off. For 90 days following the IAA Spin-Off, continuing KAR directors who had a deferred stock account pursuant to the Director Deferred Compensation Plan were provided a one-time election to convert their shares of phantom stock in IAA into (i) shares of phantom stock in KAR, (ii) deferred cash, or (iii) a combination of phantom stock in KAR and deferred cash. Messrs. Hill, Howell, Jacoby, Kestner and Smith each elected to convert out of shares of phantom stock in IAA: Mr. Hill elected to receive shares of phantom stock in KAR, Mr. Kestner elected to receive shares of phantom stock in KAR and deferred cash, and the remaining directors elected to receive deferred cash.

(2)
This number represents vested phantom stock and dividend equivalents which are deferred in each director's account pursuant to the Director Deferred Compensation Plan. These shares will be settled for shares of our common stock on a one-for-one basis.

(3)
Mr. Bourell served as a director until June 4, 2019, the date of our 2019 annual meeting. Mr. Larson and Ms. Jolliffe served as directors until June 27, 2019, and thereafter became directors of IAA in connection with the IAA Spin-Off. The unvested awards held by Mr. Larson and Ms. Jolliffe vest based on his or her continued service with IAA. Ms. Ecton served as a director until July 1, 2019.


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BENEFICIAL OWNERSHIP OF THE COMPANY'S
COMMON STOCK

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 9, 2020 of: (1) each person or entity who beneficially owns more than 5% of any class of the Company's voting securities of which 129,167,854 shares of common stock were outstanding as of April 9, 2020; (2) each of our directors, director nominees and named executive officers; and (3) all of our directors, director nominees and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, each stockholder will have sole voting and investment power with respect to the shares indicated as beneficially ownled, unless otherwise indicated in a footnote to the following table. The percentage calculations below are based on 129,167,854 shares of our common stock outstanding as of April 9, 2020, rather than the percentages set forth in any stockholder's Schedule 13D or Schedule 13G filing. Unless otherwise indicated in a footnote, the business address of each person is our corporate address, c/o KAR Auction Services, Inc., 11299 North Illinois Street, Carmel, Indiana 46032.

 
  Shares Beneficially Owned
Name of Beneficial
Owner
 
Number of
Shares(1)
  Percent of
Class(2)

5% BENEFICIAL OWNERS

       

BlackRock, Inc.(3)

  15,779,735   12.22%

The Vanguard Group(4)

  14,861,985   11.51%

Wellington Management Group LLP(5)

  9,356,074   7.24%

First Manhattan Co.(6)

  6,796,427   5.26%

NAMED EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES

       

David DiDomenico

  13,948   *

Carmel Galvin

  2,030   *

Donald S. Gottwald

  56,672   *

James P. Hallett(7)

  627,347   *

John C. Hammer

  6,943   *

Mark E. Hill(8)

  95,413   *

J. Mark Howell

  15,356   *

Stefan Jacoby

  2,312   *

Peter J. Kelly(7)

  198,715   *

Michael T. Kestner

  37,933   *

Eric M. Loughmiller(7)

  340,784   *

Rebecca C. Polak

  100,500   *

Mary Ellen Smith

  3,839   *

Stephen E. Smith

  18,909   *

Executive officers, directors and director nominees as a group (19 persons)(9)

  1,688,334   1.31%

* Less than one percent

(1)
The number of shares includes shares of our common stock subject to vesting requirements and options exercisable within 60 days of April 9, 2020.

(2)
Shares subject to options exercisable within 60 days of April 9, 2020 are considered outstanding for the purpose of determining the percent of the class held by the holder of such option, but not for the purpose of computing the percentage held by others.

(3)
Based solely on information disclosed in a Schedule 13G/A filed by BlackRock, Inc. on February 4, 2020. According to this Schedule 13G, BlackRock, Inc. has sole voting power with respect to 14,823,322 shares, sole dispositive power with respect to 15,779,735 shares, and no shared voting or dispositive power. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.


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(4)
Based solely on information disclosed in a Schedule 13G/A filed by The Vanguard Group on February 12, 2020. According to this Schedule 13G/A, The Vanguard Group has sole voting power with respect to 75,136 shares, sole dispositive power with respect to 14,783,023 shares, shared voting power with respect to 23,915 shares and shared dispositive power with respect to 78,962 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(5)
Based solely on information disclosed in a Schedule 13G filed by Wellington Management Group LLP on January 28, 2020. According to this Schedule 13G, Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP have shared voting power with respect to 8,224,889 shares, shared dispositive power with respect to 9,356,074 shares, and no sole voting or dispositive power. The address of Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP is 280 Congress Street, Boston, MA 02210.

(6)
Based solely on information disclosed in a Schedule 13G filed by First Manhattan Co. on February 4, 2020. According to this Schedule 13G, First Manhattan Co. has sole voting power with respect to 43,175 shares, sole dispositive power with respect to 43,175 shares, shared voting power with respect to 6,658,762 shares and shared dispositive power with respect to 6,753,252 shares. The address of First Manhattan Co. is 399 Park Avenue, New York, NY 10022.

(7)
Includes the following shares of our common stock issuable pursuant to options that are exercisable within 60 days of April 9, 2020: Mr. Hallett, 194,404; Mr. Loughmiller, 97,204; and Mr. Kelly, 170,000.

(8)
Includes 800 shares held in a family member's brokerage account, over which Mr. Hill holds a power of attorney. Mr. Hill disclaims beneficial ownership of these shares.

(9)
Includes an aggregate of 461,608 shares of our common stock issuable pursuant to options that are exercisable within 60 days of April 9, 2020.


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GRAPHICS

PROPOSAL

In accordance with Section 14A of the Exchange Act and related SEC rules, the Company seeks a non-binding advisory vote from its stockholders to approve the compensation of its named executive officers as described in the "Compensation Discussion and Analysis" section beginning on page 25 and the compensation tables that follow such section. The Company seeks this non-binding advisory vote from its stockholders annually, pursuant to the results of the stockholders' vote at the Company's 2017 annual meeting of stockholders selecting such frequency.

Our executive compensation program includes certain "best practices" in governance and executive compensation, including the following:

Stockholder alignment: We have demonstrated a trend of alignment between our TSR performance and the compensation of our CEO.

Independent Compensation Committee: All of the members of our Compensation Committee are independent under NYSE rules.

Independent compensation consultant: The Compensation Committee retains its own independent compensation consultant to review our executive compensation program and practices.

Pay for performance: Our annual incentive program is 100% performance-based and our equity incentive program is heavily performance-based with 75% of our equity awards in the form of PRSUs.

Maximum payout caps: The Compensation Committee sets maximum amounts that may be payable for annual cash incentive compensation and PRSUs.

Clawback policy for financial misconduct: Our clawback policy provides for the recovery and cancellation of an executive officer's incentive compensation in the event we are required to prepare an accounting restatement due to such executive officer's intentional misconduct.

Moderate change in control benefits: Change in control severance benefits are two times base salary and target bonus for our executive officers.

Double-trigger vesting provisions in equity award agreements: Our equity awards permit accelerated vesting of assumed or replaced equity awards upon a change in control of the Company only if an executive experiences a qualifying termination of employment in connection with or following such change in control.

Robust equity ownership requirements: We have stock ownership guidelines that are applicable to our executive officers. The stock ownership guideline for our CEO is five times his annual base salary.

In deciding how to vote on this proposal, the Board encourages you to read the "Compensation Discussion and Analysis" section and the compensation tables that follow. Because this vote is advisory, it will not be binding upon the Board; however, the Board and the Compensation Committee value our stockholders' opinions, and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.

The affirmative vote of the holders of a majority of the shares present and entitled to vote at the 2020 annual meeting is required to approve this proposal.

  The Board of Directors recommends that you vote "FOR" the advisory vote to approve executive compensation.

 

 

 
    Proxies solicited by the Board of Directors will be voted "FOR" the advisory vote to approve executive compensation unless stockholders specify a contrary vote.


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COMPENSATION DISCUSSION AND ANALYSIS

OVERVIEW

The following discussion and analysis of our compensation program for named executive officers should be read in conjunction with the tables and text elsewhere in this proxy statement that describe the compensation awarded and paid to the named executive officers.

Named Executive Officers

Our named executive officers for the last completed fiscal year were (i) our chief executive officer; (ii) our chief financial officer; (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; and (iv) an additional individual who served as an executive officer during a portion of the last completed fiscal year but who was not serving as an executive officer at the end of the last completed fiscal year. Our named executive officers are:

 
  Name
  Title
    James P. ("Jim") Hallett   Chief Executive Officer and Chairman of the Board
    Eric M. ("Eric") Loughmiller   Executive Vice President and Chief Financial Officer
  Peter J. ("Peter") Kelly   President
    John C. ("John") Hammer*   Chief Commercial Officer for KAR and President of ADESA
  Donald S. ("Don") Gottwald**   Former Chief Strategy Officer and President of Digital, Data and Mobility Solutions
    Rebecca C. ("Becca") Polak***   Former Chief Legal Officer and Secretary for KAR and President of TradeRev
*
Effective March 8, 2020, Mr. Hammer began serving as the Company's Chief Commercial Officer in addition to serving as President of ADESA.

**
Mr. Gottwald resigned from the Company, effective April 3, 2020.

***
Ms. Polak resigned from the Company, effective October 8, 2019. "TradeRev" is the assumed name for Nth Gen Software Inc.

This Compensation Discussion and Analysis is organized into six sections:

  GRAPHIC   Executive Summary (pages 27-28)

 

GRAPHIC

 

Compensation Philosophy and Objectives (page 29)

 

GRAPHIC

 

The Role of the Compensation Committee and the Executive Officers in Determining Executive Compensation (pages 29–30)

 

GRAPHIC

 

Elements Used to Achieve Compensation Philosophy and Objectives (pages 31–39)

 

GRAPHIC

 

Compensation Policies and Other Information (pages 40–41)

 

GRAPHIC

 

Results of Say on Pay Votes at 2019 Annual Meeting (page 41)

2019 Executive Compensation Highlights

Payouts based on Adjusted EBITDA performance in 2019 under our Annual Incentive Program (as subsequently defined) were at 50% of the target award amount for the named executive officers whose payout is based on the performance of KAR and 82%, 66% and 23% of the target award amount for the remaining three named executive officers whose payout is based on the performance of both KAR and Digital, Data & Mobility Solutions (for Mr. Gottwald), ADESA (for Mr. Hammer) and TradeRev (for Ms. Polak).

We continued our heavy focus on performance-based equity awards with 75% of our 2019 equity awards in the form of PRSUs which KAR PRSUs, following adjustments upon the IAA Spin-Off, achieved 71.1% of target based on KAR's Operating Adjusted Net Income Per Share performance in 2019.

These compensation highlights are discussed in more detail below.


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IAA Spin-Off

As noted above, on June 28, 2019, we completed the IAA Spin-Off, resulting in KAR and IAA being two independent, publicly-traded companies. In connection with the IAA Spin-Off, KAR stockholders received one share of IAA stock for every one share of KAR stock held as of June 18, 2019.

All equity awards outstanding as of June 28, 2019 were adjusted as a result of the IAA Spin-Off to preserve the economic value of the awards in accordance with the Employee Matters Agreement, dated June 27, 2019, between KAR and IAA. The adjusted KAR awards and adjusted IAA awards are generally subject to the same terms and conditions, and will continue to vest on the same schedule, except as noted below. For purposes of award vesting, continued employment with KAR is treated as continued employment for both KAR and IAA awards. The following summarizes the adjustments to each type of award:

RSUs: Holders of outstanding KAR RSUs retained such KAR RSUs and also received an RSU relating to IAA common stock in respect of each KAR RSU held.

PRSUs Granted in 2017 and 2018: KAR 2017 and 2018 PRSUs were converted into time-based RSUs relating to KAR common stock at the target performance level, and each holder retained such KAR RSUs and received a corresponding RSU relating to IAA common stock for each KAR RSU held.

PRSUs Granted in 2019: Holders of KAR 2019 PRSUs retained such PRSUs and received a PRSU relating to IAA common stock in respect of each KAR PRSU held. The PRSUs were subject to adjusted performance criteria for the period from January 1, 2019, through December 31, 2019, which performance criteria was determined by the KAR and IAA compensation committees following the IAA Spin-Off. For both the KAR PRSUs and the IAA PRSUs, the performance-based vesting criteria applied to the 2019 performance year only, with only time-based vesting being applicable through the third anniversary of the applicable grant date for KAR PRSUs and through December 31, 2021 for IAA PRSUs.

Stock Options: Each KAR stock option was converted into two separate options, an adjusted option to purchase KAR common stock and an option to purchase IAA common stock, with the number and exercise prices of both options adjusted to maintain economic value. A conversion formula based on the pre-spin closing price of KAR and IAA was used to determine the exercise prices of the adjusted options.


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EXECUTIVE SUMMARY

For the year ended December 31, 2019, the Company again achieved solid financial results. Specific highlights for fiscal 2019 included:

    On June 28, 2019, we successfully completed the IAA Spin-Off.    
         

  
    

 

GRAPHIC

 

Operating revenue was up 14% to approximately $2.8 billion (up 7% excluding purchased vehicle sales).

 

 
                

  
    

 

Total vehicles sold rose approximately 9% to approximately 3.8 million units.

 

GRAPHIC

 

 
                

  
    

 

GRAPHIC

 

Gross profit increased approximately 4% to $1.2 billion.

 

 
                

  
    

 

Through share buybacks and dividends, in 2019 we returned
approximately
$284 million to stockholders and invested
approximately
$282 million in our business through
capital expenditures and strategic acquisitions.

 

 
            

  
    

 

GRAPHIC

 

We achieved net income from continuing operations of $92.4 million.

 

 
                
GRAPHIC   Adjusted EBITDA* rose 1%
to
$510.0 million.


* Adjusted EBITDA is a non-GAAP measure and is defined and reconciled to the most comparable GAAP measure, net income from continuing operations, in our Annual Report on Form 10-K for the year ended December 31, 2019 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—EBITDA and Adjusted EBITDA."
        

 


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Our Executive Compensation Practices are Aligned with Stockholders' Interests

We maintain a compensation program structured to achieve a close connection between executive pay and Company performance. We believe that this strong pay for performance orientation has served us well in recent years.

WHAT WE DO

Pay for performance: Our annual incentive program is 100% performance-based and our equity incentive program is heavily performance-based with 75% of our equity awards in the form of PRSUs.

Independent Compensation Committee: All of the members of our Compensation Committee are independent under NYSE rules.

Independent compensation consultant: The Compensation Committee retains its own independent compensation consultant to evaluate and review our executive compensation program and practices.

Stockholder alignment: We have demonstrated a trend of alignment between our TSR performance and the compensation of our CEO, as shown in the chart below.

GRAPHIC

    Fiscal Year       2014
YE
      2015       2016       2017       2018       2019    
    CEO Pay ($000)         $4,824     $5,078     $5,812     $6,138     $5,529  
    Indexed TSR*       100       110       130       159       154       192    
*
TSR assumes an investment of $100, dividend reinvestment and takes into account the value of IAA common shares distributed in the IAA Spin-Off.
Maximum payout caps: The Compensation Committee sets maximum amounts that may be payable for annual cash incentive compensation and PRSUs.

Clawback policy: Our clawback policy provides for the recovery and cancellation of incentive compensation of an executive officer in the event we are required to prepare an accounting restatement due to such executive officer's intentional misconduct.

Moderate change in control benefits: Change in control severance benefits are two times base salary and target bonus for executive officers.

"Double-trigger" equity vesting: Accelerated vesting of assumed or replaced equity awards upon a change in control of the Company is only permitted if an executive experiences a qualifying termination of employment in connection with or following such change in control.

Robust equity ownership requirements: The stock ownership guideline for our CEO is five times his annual base salary, and three times annual base salary for the other named executive officers. Executive officers are required to hold 60% of vested shares, net of taxes, until stock ownership guidelines are met.

Annual compensation risk assessment: Each year we perform an assessment of any risks that could result from our compensation programs and practices.

WHAT WE DON'T DO

Pay dividends on unvested equity awards: Dividend equivalents and cash are accrued on PRSUs and RSUs, respectively, but are only paid out if and to the extent the underlying PRSUs and RSUs vest.

Provide excessive perquisites: We provide a limited number of perquisites that are designed to support a competitive total compensation package.

Guarantee incentive compensation: Our annual incentive program and our PRSU equity awards are entirely performance-based and our executive officers are not guaranteed any minimum levels of payment.
Allow hedging or pledging of the Company's securities: We prohibit hedging, pledging and short sales of Company stock by our directors and executive officers.

Reprice stock options: Stock option exercise prices are set equal to the grant date market price and cannot be repriced or discounted without stockholder approval.

Provide pension benefits or supplemental retirement plans:We do not maintain a defined benefit pension or supplemental retirement plans for our executive officers.


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COMPENSATION PHILOSOPHY AND OBJECTIVES

We design and administer our executive pay programs to help ensure the compensation of our named executive officers is (i) closely aligned with our performance on both a short-term and long-term basis; (ii) linked to specific, measurable results intended to create value for stockholders; and (iii) competitive in attracting and retaining key executive talent into the vehicle remarketing and auto finance industry. Each of the compensation programs that we have developed and implemented is intended to satisfy one or more of the following specific objectives:

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.

While the Company does not target any specific percentile positioning versus the market, the market median is used as a reference point but is not the sole determinant when making compensation decisions. Compensation decisions are made considering a number of factors including experience, tenure, sustained performance, specific requirements of roles relative to the market and individual and Company performance.

THE ROLE OF THE COMPENSATION COMMITTEE AND
THE EXECUTIVE OFFICERS IN DETERMINING
EXECUTIVE COMPENSATION

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. Although the Company is comprised of a unique mix of businesses and lacks directly comparable public companies, the Compensation Committee understands that most companies consider pay levels at comparably-sized, peer companies when setting named executive officer compensation levels. With assistance from its independent compensation consultant, ClearBridge, the Compensation Committee has developed a meaningful comparator group for the Company.

In order to confirm competitiveness of compensation, the Compensation Committee uses a combination of proxy compensation data of a "proxy comparator group" and survey data (from the Aon Hewitt and Mercer general industry and service industry surveys) in setting and adjusting compensation levels. In light of the lack of directly comparable companies for the Company's business, as noted above, companies in the proxy comparator group were selected based on (i) a focus on service-oriented industries; (ii) similarly-sized revenue and market capitalization levels; (iii) comparable growth, profitability and/or market valuation profiles; and (iv) companies with which the Company competes for executive talent. Where possible, the Compensation Committee included companies that are in related or similar industries to the Company.


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The proxy comparator group used from 2017 until July 2019 consisted of the following 17 companies:

2019 Proxy Comparator Group
Allison Transmission Holdings, Inc.
Cintas Corporation
Copart, Inc.
CDK Global, Inc.
eBay Inc.
Equifax Inc.
  GATX Corporation
LKQ Corporation
MSC Industrial Direct Co. Inc.
Old Dominion Freight Line Inc.
Pitney Bowes Inc.
Sotheby's
  Stericycle, Inc.
Total System Services, Inc.
Werner Enterprises, Inc.
Westinghouse Air Brake Technologies Corporation
Worldpay, Inc. (formerly Vantiv, Inc. and acquired
by Fidelity National Information Services, Inc. on
July 31, 2019)

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 2019 compensation levels. The Compensation Committee also considered experience, tenure, sustained performance, specific requirements of roles relative to market and individual and Company performance.

In July 2019, the Compensation Committee reviewed the proxy comparator group following the IAA Spin-Off and, based on the recommendation of ClearBridge, approved a revised proxy comparator group consisting of the following 16 companies to be used in making 2020 compensation decisions:

Revised 2020 Proxy Comparator Group
Allison Transmission Holdings, Inc.
Copart, Inc
CDK Global, Inc.
Equifax Inc.
GATX Corporation
LKQ Corporation
  MSC Industrial Direct Co. Inc.
Old Dominion Freight Line Inc.
Pitney Bowes Inc.
Richie Bros. Auctioneers Incorporated
Sotheby's
  Stericycle, Inc.
Total System Services, Inc.
Werner Enterprises, Inc.
Westinghouse Air Brake Technologies Corporation
Worldpay, Inc. (acquired by Fidelity National
Information Services, Inc. on July 31, 2019)

Companies in the revised 2020 proxy comparator group were selected based on the same criteria as the 2019 proxy comparator group, adjusted to the Company's revenue and market capitalization levels following the IAA Spin-Off. In light of the Company's profile following the IAA Spin-Off, Richie Bros. Auctionneers Incorporated was added as a comparator company and eBay Inc. and Cintas Corporation were removed as comparator companies.

Role of the Independent Compensation Consultant. The Compensation Committee used ClearBridge as its independent compensation consultant in 2019. ClearBridge provided the Compensation Committee advice and guidance with respect to (i) the assessment of the Company's executive compensation programs and practices; (ii) the evaluation of long-term incentive compensation practices and annual and long term incentive plan design; (iii) the selection of a proxy comparator group; and (iv) the competitiveness of the executive officers' elements of compensation. Prior to the IAA Spin-Off, ClearBridge also provided advice and guidance regarding adjustments to outstanding cash and equity incentive awards related to the IAA Spin-Off and recommendations with respect to the design of IAA's compensation plans and programs. ClearBridge regularly attends Compensation Committee meetings and attends executive sessions as requested by the Chairman of the Compensation Committee. The Compensation Committee has reviewed the independence of ClearBridge in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that the work of ClearBridge for the Compensation Committee does not raise any conflict of interest. All work performed by ClearBridge is and was subject to review and approval of the Compensation Committee.

Role of the Executive Officers. Mr. Hallett regularly participates in meetings of the Compensation Committee at which compensation actions involving our named executive officers are discussed. Mr. Hallett assists the Compensation Committee by making recommendations regarding compensation actions for the executive officers other than himself. Mr. Hallett recuses himself and does not participate in any portion of any meeting of the Compensation Committee at which his compensation is discussed.


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ELEMENTS USED TO ACHIEVE COMPENSATION PHILOSOPHY
AND OBJECTIVES

Elements of 2019 Executive Compensation Program Design

The following table lists the elements of compensation for our 2019 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 our proxy comparator group.

      Element
Key
Characteristics


Why We Pay
This Element


How We
Determine Amount


2019
Decisions

Fixed

      Base salary   Fixed compensation component payable in cash.

Reviewed annually and adjusted when appropriate.

  Reward the named executive officers for their past performance and facilitate the attraction and retention of a skilled and experienced executive management team.   Company performance, individual performance, experience, job scope, tenure, review of competitive pay practices and base salary as a percentage of total compensation.   Three named executive officers received a salary adjustment in 2019. See pages 32–33.
    Annual cash incentive awards   Variable compensation component payable in cash based on performance against annually established targets.

No payouts if a threshold level of performance is not achieved; payouts are capped at a maximum level of performance.

  Motivate and reward the successful achievement of pre-determined financial objectives at the Company.   Award opportunities are based on individual performance, experience, job scope and review of competitive pay practices.

Actual award payouts were based on achievement of 2019 Adjusted EBITDA (and for Ms. Polak, an additional TradeRev operational goal as described on page 35).

  KAR's performance resulted in 50% of the target award for three named executive officers of KAR; Digital, Data & Mobility Solutions', ADESA's and TradeRev's respective performance resulted in 82%, 66% and 23% of the target award for the remaining three named executives officers, respectively, based on Adjusted EBITDA performance in 2019.
           


    
Variable


 
  Performance-based restricted stock units (PRSUs)   PRSUs vest at the end of a three-year performance period. However, in connection with the IAA Spin-Off, the KAR 2019 PRSU awards were adjusted to a one-year performance period (January 1, 2019 to December 31, 2019), and will be subject only to time-based vesting through the third anniversary of grant.

No PRSUs earned if a threshold level of performance is not achieved; PRSUs are capped at a maximum level of performance.

  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.

  Award opportunities are based on individual's ability to impact future results, job scope, individual performance and review of competitive pay practices.

KAR 2019 PRSU awards earned based on 2019 Operating Adjusted Net Income Per Share performance through December 31, 2019, but remain subject to time-based vesting through the third anniversary of grant.

PRSU awards made up 75% of the value of the aggregate long term incentives granted to the named executive officers in 2019.

  The Compensation Committee granted PRSUs to all of the named executive officers in 2019. See page 36.
           
    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.   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 2019.

  The Compensation Committee granted RSUs to all of the named executive officers in 2019. See page 36.
                         


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Compensation Structure and Goal Setting

Our executive compensation program is designed to deliver compensation in accordance with corporate and business unit performance with a large percentage of compensation at risk through long-term equity awards and annual cash incentive awards. These awards are linked to actual performance, consistent with our belief that a significant amount of executive compensation should be in the form of equity and that a greater percentage of compensation should be tied to performance for executives who bear higher levels of responsibility for our performance. The mix of target direct compensation awarded in 2019 for our CEO and the average of our other named executive officers is shown in the charts below. Approximately 84% of our CEO's total compensation, and approximately 74% of the average total compensation of our other named executive officers, is at-risk, consisting of PRSUs, restricted stock units ("RSUs") and other performance-based incentives.

CEO Compensation   Other Named Executive Officer
Average Compensation

GRAPHIC

 

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Base Salary

General. Annual salary levels for our named executive officers are based upon various factors, including the amount and relative percentage of total compensation that is derived from base salary when setting the compensation of our executive officers, Company performance, individual performance, experience, job scope and tenure. In view of the wide variety of factors considered by the Compensation Committee in connection with determining the base salary of each of our named executive officers, the Compensation Committee has not attempted to rank or otherwise assign relative weights to the factors that it considers. A description of how these factors were applied in 2019 is described below.

Base Salaries for 2019. In late 2018 and the first quarter of 2019, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2019. After considering multiple factors as noted above, the Compensation Committee approved a decrease in base salary for Mr. Gottwald and an increase in base salary for Messrs. Hammer and Kelly. The Compensation Committee did not approve a base salary adjustment for Messrs. Hallett and Loughmiller and Ms. Polak because the Compensation Committee determined that their base salaries were already set at a competitive level.


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The following base salaries were in effect for 2019:

Name
Base Salary Increase % Effective Date

Jim Hallett

$975,000 0% N/A

Eric Loughmiller

$550,000 0% N/A

Peter Kelly

$600,000 30% January 7, 2019

John Hammer

$525,000 5% March 1, 2019

Don Gottwald

$500,000 (14%) January 28, 2019

Becca Polak

$515,000 0% N/A

The base salary increase effective January 7, 2019 for Mr. Kelly was based on his new role as President of the Company and the base salary adjustment effective January 28, 2019 for Mr. Gottwald was to reflect his new role as Chief Strategy Officer and President of Digital, Data and Mobility Solutions. The base salary increase effective March 1, 2019 for Mr. Hammer was a market adjustment and to support engagement during a transformative period at ADESA.

Base Salaries for 2020. In late 2019 and the first quarter of 2020, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2020. After considering multiple factors as noted above, the Compensation Committee approved the following base salaries for 2020:

Name
Base Salary Increase % Effective Date

Jim Hallett

$975,000 0% N/A

Eric Loughmiller

$550,000 0% N/A

Peter Kelly

$600,000 0% N/A

John Hammer

$546,000 4% January 1, 2020

Don Gottwald

$500,000 0% N/A

Becca Polak

N/A N/A N/A

The Compensation Committee did not approve a 2020 base salary adjustment for Messrs. Hallett, Loughmiller, Kelly or Gottwald because the Compensation Committee determined that their base salaries were already set at competitive levels. The base salary increase for Mr. Hammer was based on a variety of factors, including market positioning, individual performance and the criticality of his role. Ms. Polak was not employed in 2020. In order to confirm competitiveness of compensation, the Compensation Committee reviews survey data and proxy compensation data of our proxy comparator group.

On March 26, 2020, the Company announced that in connection with the ongoing COVID-19 pandemic, the Company's executive officers have voluntarily elected to reduce or forgo their respective base salaries effective April 5, 2020 through at least June 27, 2020, with Messrs. Hallett, Loughmiller and Kelly each voluntarily electing to forgo 100% of his base salary and Mr. Hammer voluntarily electing to reduce his base salary 50% during this period.

Annual Cash Incentive Program

General. 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 KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan, as amended (the "Omnibus Plan"), the grant of cash-based awards to eligible participants is contingent upon the achievement of certain pre-established corporate performance goals as determined by the Compensation Committee. As described below, Adjusted EBITDA performance goals were utilized for 2019, with Ms. Polak's award subject to an additional TradeRev operational goal.

Use of 2019 Adjusted EBITDA

In 2019, the Compensation Committee used "2019 Adjusted EBITDA" for KAR, and, with respect to certain named executive officers, for Digital, Data & Mobility Solutions, ADESA and TradeRev, as the relevant metric for determining awards under the Annual Incentive Program.

"Adjusted EBITDA" is equal to EBITDA (earnings before interest expense, income taxes, depreciation and amortization) adjusted to exclude, among other things:

gains and losses from asset sales;

unrealized foreign currency translation gains and losses in respect of indebtedness;


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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;

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.

Using these measures, the Compensation Committee establishes, on an annual basis, specific targets that determine the size of payouts under the Annual Incentive Program. In 2019, the annual incentive opportunity based on achievement of 2019 Adjusted EBITDA for each named executive officer was as follows:

 
   
  Bonus Opportunity   Bonus Goal Weighting %
2019 Adjusted EBITDA
Name
  Base
Salary
  Threshold
% of
Base Salary
  Target
% of
Base
Salary
  Superior
% of
Base
Salary
  KAR
Auction
Services
  ADESA
  Digital,
Data &
Mobility
Solutions
  TradeRev(1)
Jim Hallett   $975,000   62.5   125   187.5   100      
Eric Loughmiller   $550,000   50   100   150   100            
Peter Kelly   $600,000   50   100   150   100      
John Hammer   $525,000   50   100   150   60   40        
Don Gottwald   $500,000   50   100   150   60     40  
Becca Polak   $515,000   50   100   150   60           40
(1)
As described below, Ms. Polak's annual incentive opportunity tied to TradeRev was also subject to an operational goal.

The chart below reflects Adjusted EBITDA performance metrics and achieved results for 2019 (dollars in millions). The payout percentages are based on the achievement of the performance metrics set forth below, with payment amounts prorated for performance between the established levels.

Achieved Results

GRAPHIC

Target Incentive Opportunity: Base Pay multiplied by Individual Target Opportunity

Business Performance Factor: 2019 Adjusted EBITDA of KAR (100% or 60%) and 2019 Adjusted EBITDA of Business Unit (0% or 40%)


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Performance Targets for the Annual Incentive Program

The Compensation Committee reviews the Company's business plan approved by the Board and determines the level of performance required to receive threshold, target and superior annual incentive payouts. The Compensation Committee established the performance objectives in amounts which it believed would increase stockholder value and be achievable given a sustained performance on the part of the named executive officers and which would require increasingly greater results to achieve the target and superior objectives. The Compensation Committee may decrease the potential payouts at each performance target if, in the discretion of the Compensation Committee, the circumstances warrant such an adjustment. In 2019, the Compensation Committee did not increase or decrease the potential payouts of any 2019 annual incentive program award. In July 2019, following the IAA Spin-Off, the Compensation Committee adjusted the performance targets for KAR in order to reflect the exclusion of the operating results of IAA.

2019 Performance Targets. The following chart provides the 2019 Adjusted EBITDA performance targets established by the Compensation Committee for 2019, as adjusted for KAR following the IAA Spin-Off, as well as the actual level of performance achieved (dollars in millions):

 
  Threshold
  Target
  Superior
  Achieved
Results(1)(2)
  Percentage of Target
Award Earned (Adjusted
EBITDA)

KAR

  $500.0   $521.0   $560.0   $500.0   50.0%

ADESA

  $301.3   $317.2   $380.6   $313.8   89.4%

Digital, Data & Mobility Solutions

  $121.9   $131.7   $144.9   $139.5   129.3%

TradeRev

  ($55.0)   ($53.5)   ($40.0)   ($62.1)   0%
(1)
KAR's reported Adjusted EBITDA for the year ended December 31, 2019 was $510.0 million, but for Annual Incentive Program purposes, certain acquisitions consummated in 2019 were excluded, which resulted in Adjusted EBITDA of $500.0 million.

(2)
ADESA's performance targets and achieved results in the above chart are used for Annual Incentive Program purposes only and include certain technology expenses recorded in "holding company" expenses and revenue for certain vehicles sold on the TradeRev platform, and exclude the operating results of Digital, Data & Mobility Solutions, TradeRev and certain international business for Annual Incentive Program purposes. ADESA's reported Adjusted EBITDA for the year ended December 31, 2019 was $448.0 million which does not reflect such inclusions and exclusions described above.

In addition, the Compensation Committee determined that Ms. Polak's annual incentive opportunity tied to TradeRev performance would also be subject to an operational performance goal whereby TradeRev must sell at least 190,000 vehicles in 2019 for any payout to be earned. That goal was not met, and therefore Ms. Polak was not eligible to receive a payout with respect to TradeRev.

2019 Annual Incentive Program Payouts.    Under the Annual Incentive Program, threshold performance objectives must be met in order for any payout to occur. Payouts can range from 50% of target awards for performance at threshold up to a maximum of 150% of target awards for superior performance or no payout if performance is below threshold. The table below shows the annual incentive opportunities for our named executive officers for 2019. Because KAR achieved at least the threshold level of performance in 2019, each of our named executive officers was eligible to receive an award under the Annual Incentive Program in 2019, which amounts are set forth in the "Summary Compensation Table for 2019" on page 44. Based on the Company's performance during 2019 and the accompanying payout percentages for the different performance goals set forth above, our named executive officers earned the percentages and corresponding payout amounts of their target annual incentive awards as set forth below based on the following formula:

Name  
  Target Annual
Incentive Award
  Percentage of Target
Award Earned
(Adjusted
EBITDA)(1)
  2019 Payout(2)

Jim Hallett

  $1,218,750   50%   $609,375

Eric Loughmiller

  $550,000   50%   $275,000

Peter Kelly

  $600,000   50%   $300,000

John Hammer

  $525,000   66%   $345,190

Don Gottwald

  $500,000   82%   $408,552

Becca Polak

  $515,000   23%   $115,875


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(1)
The percentages of target annual incentive awards earned for Messrs. Hammer and Gottwald and Ms. Polak are based on the percentages of target awards earned for both KAR and (i) ADESA, (ii) Digital, Data & Mobility Solutions, and (iii) TradeRev, respectively.

(2)
Ms. Polak's 2019 annual incentive award payout was prorated based on her October 8, 2019 separation date.

2020 Use of Management by Objectives

For 2019, the Compensation Committee decided to rely on financial performance metrics exclusively and therefore did not include a Management by Objective ("MBO") component in the 2019 Annual Incentive Program. For the 2020 Annual Incentive Program, the bonus opportunity for each named executive officer will be weighted on a combination of the Company's financial performance (80%) and the executive's performance against his or her MBOs (20%). Threshold financial performance objectives must be met in order for any payout to occur. Each named executive officer's 2020 MBOs are tailored to their role and aligned with Company initiatives relating to new product and strategy, customers and people and culture.

Long-Term Incentive Opportunities

The Company provides long-term incentive compensation opportunities in the form of PRSUs and RSUs, each as described below. Although we have granted stock options in the past, stock options are not currently part of the Company's long-term incentive program.

2019 Long-Term Incentive Awards. On February 22, 2019 (and for Mr. Hammer, again on March 1, 2019), the Compensation Committee granted PRSUs and RSUs under its long-term incentive program to the Company's named executive officers, as described in the table below. Awards were based on the individual's ability to impact future results, job scope, individual performance and a review of competitive pay practices.

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
Operating
Adjusted Net
Income Per
Share Goal)
  Value of
Target Shares
at Grant
  RSUs
  Value of
RSUs at Grant

Jim Hallett

  62,155   $2,925,014   20,719   $975,036

Eric Loughmiller

  21,914   $1,031,273   7,305   $343,773

Peter Kelly

  19,125   $900,023   6,375   $300,008

John Hammer(1)

  20,484   $965,663   6,830   $321,982

Don Gottwald

  9,961   $468,765   3,321   $156,286

Becca Polak

  14,364   $675,970   4,788   $225,323
(1)
$500,000 of the aggregate value of Mr. Hammer's equity awards are attributable to a special sign-on award to make up for compensation from his previous employer that was forfeited when he joined the Company, with a 75%/25% allocation between PRSUs and RSUs. Mr. Hammer also received a one-time make-whole grant of 2,554 PRSUs ($121,877 value at grant) and 852 RSUs ($40,657 value at grant) on March 1, 2019 to reflect an increase in his long-term incentive target opportunity, which are included in this table.

2019 Performance-Based RSU Awards

At the time of grant, the PRSUs were to vest if and to the extent that the sum of the Company's "Cumulative Operating Adjusted Net Income Per Share" exceeded certain levels over the three-year measurement period beginning on January 1, 2019 and ending on December 31, 2021. In connection with the IAA Spin-Off, certain adjustments were made as described below.

"Cumulative Operating Adjusted Net Income Per Share" for a fiscal year is calculated by dividing Operating Adjusted Net Income by the weighted average diluted common shares outstanding per year. "Operating 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 non-recurring and unbudgeted capital transactions, including debt prepayment, debt refinancing, share repurchases and related financing costs not contemplated in the long term incentive targets; (ii) exclude amortization expense


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associated with acquired intangible assets recorded during purchase accounting of acquisitions; (iii) exclude acquisition contingent consideration; (iv) exclude the impact of significant acts of God or other events outside of the Company's control that may affect the overall economic environment; (v) exclude significant asset impairments; (vi) exclude the impact of adoption of new accounting standards; and (vii) exclude the impact of tax rate changes caused by changes in tax legislation.

The amount of the target PRSUs actually earned and paid in shares of common stock in a lump sum following the performance period was to be: 0% for below threshold performance, 50% for threshold performance, 100% for target performance and up to 200% for achieving the maximum performance level or higher. Linear interpolation was to be used to calculate the percentage of PRSUs earned and paid if performance falls between the levels described above.

In connection with the IAA Spin-Off, the PRSUs granted in 2019 were subject to adjusted performance criteria and an adjusted performance period from January 1, 2019 to December 31, 2019. As described below, following the completion of the adjusted performance period, the 2019 PRSUs were converted into time-based RSUs with the number so converting based on actual performance during the one-year performance period. The RSUs will vest on the third anniversary of the grant of the 2019 PRSUs, subject to continued employment as required under the original 2019 PRSU award agreement.

The number of PRSUs that converted into RSUs was based on the Company's Operating Adjusted Net Income Per Share achieved, which was determined in accordance with the chart below:

Operating Adjusted Net     
Income Per Share During the
Measurement Period
  Number of PRSUs
Converting into RSUs

Below Threshold:

   

Below $1.02

  0% of Target

Threshold:

   

$1.02

  50% of Target

Target Range:

   

$1.21–$1.33

  100% of Target

Maximum:

   

Greater than or equal to $1.52

  200% of Target

The Company achieved Operating Adjusted Net Income Per Share of $1.10 versus a target range of $1.21 to $1.33 for the one-year performance period ended December 31, 2019. As such, on February 19, 2020, based on the Operating Adjusted Net Income Per Share achieved, 71.1% of the target 2019 PRSUs converted into RSUs, above the threshold level but below the target level, and resulted in the following number of PRSUs converting to RSUs:

Name        
  Number of PRSUs
Converting into RSUs
(including dividend
equivalents)
  Value of 2019 PRSUs
Converted into RSUs(1)

Jim Hallett

  45,490   $1,057,643

Eric Loughmiller

  16,038   $372,885

Peter Kelly

  13,997   $325,430

John Hammer

  14,991   $348,541

Don Gottwald

  7,290   $169,493

Becca Polak

  2,628   $61,101
(1)
Based on a share price of $23.25, the February 19, 2020 market close price.

2019 Time-Based RSU Awards

One-third of the RSUs will vest and convert into shares of common stock of the Company 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.


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Prior Years' Awards.

2018 Performance-Based and Time-Based RSU Awards

As previously disclosed, on March 2, 2018, the Compensation Committee granted PRSUs and RSUs to the Company's named executive officers, some of which remained outstanding at fiscal year-end 2019. The amounts of PRSUs and RSUs are disclosed in the "Outstanding Equity Awards" table below. Other than certain adjustments made to the PRSUs granted in 2018 due to the IAA Spin-Off (described below), these awards have terms substantially similar to those granted in 2019. For the year ended December 31, 2019, one-third of the RSUs had vested, as disclosed in the "Option Exercises and Stock Vested" table below.

In connection with the IAA Spin-Off, the PRSUs granted in 2018 were converted into time-based RSUs with the number so converting based on target level performance. The RSUs will vest on the third anniversary of the grant of the 2018 PRSUs, subject to continued employment as required under the original 2018 PRSU award agreement.

The number of 2018 PRSUs that converted into RSUs was based on the target level of Cumulative Operating Adjusted Net Income Per Share, or $9.40. As such, on June 28, 2019, the following number of PRSUs converted into RSUs:

Name        
  Number of PRSUs
Converting into RSUs
(including dividend
equivalents)
  Value of 2018 PRSUs
Converted into RSUs(1)
Jim Hallett   56,175   $1,404,375
Eric Loughmiller   13,234   $330,850
Peter Kelly   8,323   $208,075
John Hammer   16,205   $405,125
Don Gottwald   14,708   $367,700
Becca Polak   12,981   $324,525
(1)
Based on a share price of $25.00, the June 28, 2019 market close price.

2017 Performance-Based and Time-Based RSU Awards

As previously disclosed, on February 24, 2017, the Compensation Committee granted PRSUs and RSUs to certain of the Company's named executive officers, some of which remained outstanding at fiscal year-end 2019. These awards have terms substantially similar to those granted in 2018. For the year ended December 31, 2019, an additional one-third of the RSUs had vested, as disclosed in the "Option Exercises and Stock Vested" table below.

In connection with the IAA Spin-Off, the PRSUs granted in 2017 were converted into time-based RSUs with the number of PRSUs so converting based on target level performance. The RSUs will vest on the third anniversary of the grant of the 2017 PRSUs, subject to continued employment as required under the original 2017 PRSU award agreement.

The number of PRSUs that converted into RSUs was based on the target level of Cumulative Operating Adjusted Net Income Per Share, or $7.20. As such, on June 28, 2019, the following number of PRSUs converted into RSUs:

Name        
  Number of PRSUs
Converting into RSUs
(including dividend
equivalents)
  Value of 2017 PRSUs
Converted into RSUs(1)

Jim Hallett

  63,337   $1,583,425

Eric Loughmiller

  15,394   $384,850

Peter Kelly

  9,962   $249,050

John Hammer

   

Don Gottwald

  17,950   $448,750

Becca Polak

  14,624   $365,600
(1)
Based on a share price of $25.00, the June 28, 2019 market close price.


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2016 Performance-Based RSU Awards

As previously disclosed, on February 19, 2019, the 2016 PRSUs vested above the target performance level but below the maximum performance level based on the sum of the Company's Cumulative Adjusted Net Income Per Share exceeding certain levels over the three-year period beginning on January 1, 2016 and ending on December 31, 2018.

Plan under which Long-Term Incentive Awards are Granted. The Company currently grants long-term incentive awards under the Omnibus Plan.

Our Board adopted the Omnibus Plan on December 10, 2009, and it has since been amended and restated, as approved by our stockholders. Under the Omnibus Plan, participants are eligible to receive stock options, restricted stock, RSUs (with or without performance conditions), stock appreciation rights, other stock-based awards and/or cash-based awards, each as determined by the Compensation Committee.

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. 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, disability and accidental death and disability insurance. We also provide travel insurance to all employees who travel for business purposes.

We also provide certain enhanced retirement vesting of equity-incentive awards as described in "Potential Payments Upon Termination or Change in Control—Potential Payments Upon Termination or Change in Control Table".

Perquisites

The Company provides the named executive officers a limited number of perquisites that the Compensation Committee believes are reasonable and consistent with the objective of attracting and retaining 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, Company-paid group term life insurance premiums and relocation benefits under the Company's mobility program. Please see footnote 6 to the "Summary Compensation Table for 2019" on page 44 for more information regarding perquisites.


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COMPENSATION POLICIES AND OTHER INFORMATION

Employment and Severance Agreements

The Compensation Committee recognizes that, from time to time, it is appropriate to enter into agreements with our executive officers to ensure that we continue to retain their services and to promote stability and continuity within the Company. All of our current named executive officers have an employment agreement with the Company. Our employment agreements with Mr. Gottwald and Ms. Polak terminated upon their separation from the Company. A description of these agreements can be found in the section titled "Potential Payments Upon Termination or Change in Control—Employment Agreements with Named Executive Officers."

Tax and Accounting Considerations

Employment Agreements. Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and related provisions impose substantial excise taxes under Section 4999 of the Code on so-called "excess parachute payments" payable to certain named executive officers upon a change in control and results in the loss of the compensation deduction for such payments by the Company.

Mr. Hallett's employment agreement, which became effective as of February 27, 2012, provides for a potential "gross-up payment" in the event that such excise taxes result from any excess parachute payments. Mr. Hallett's employment agreement provides that in the event that any payment or benefit under such agreement in connection with Mr. Hallett's employment or termination of employment is or becomes subject to an excise tax under Section 4999 of the Code, then the Company will make a cash payment to Mr. Hallett, which, after the imposition of all income, employment, excise and other taxes thereon, as well as any penalty and interest assessments associated therewith, will be sufficient to place Mr. Hallett in the same after-tax position as he would have been in had such excise tax not been applied. However, in the event that a reduction of the total payments to Mr. Hallett would avoid the application of the excise tax, then the total payments will be reduced to the extent necessary to avoid the excise tax, but in no event by more than 10% of the original amount of the total payments.

None of the employment agreements entered into with Messrs. Loughmiller, Kelly, Hammer or Gottwald, or Ms. Polak contain excise tax gross-up provisions.

Tax Deductibility of Awards Under the Omnibus Plan. Section 162(m) of the Code ("Section 162(m)") generally disallows a federal tax deduction by the Company for compensation paid to Covered Employees (as defined in Section 162(m)) in excess of $1,000,000. Historically, compensation that qualified as "performance-based compensation" under Section 162(m) could be excluded from this limit. This exception has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to the Covered Employees in excess of $1,000,000 will not be deductible by the Company unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.

The Compensation Committee historically structured certain awards under the Omnibus Plan so that they could comply with the "performance-based compensation" exception for purposes of Section 162(m) and be deductible by the Company for federal income tax purposes. However, because of the continued development of the application and interpretation of Section 162(m) and the regulations issued thereunder, we cannot guarantee that compensation intended to satisfy the requirements for deductibility under Section 162(m), as in effect prior to 2018, would or will in fact be deductible.

Though tax deductibility is one of many factors considered by the Compensation Committee when determining executive compensation, the Compensation Committee believes that the tax deduction limitation should not compromise our ability to design and maintain executive compensation arrangements that will attract and retain the executive talent to compete successfully. Therefore, 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.


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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.

Anti-Hedging and Anti-Pledging Policies

Our insider trading policy expressly prohibits our directors, officers and other employees from, among other things:

trading in options, warrants, puts and calls or similar instruments on Company securities;

selling Company securities "short";

holding Company securities in margin accounts; and

pledging Company securities as collateral for loans.

In addition to the Company's insider trading policy, the Company has a formal anti-hedging policy. This policy prohibits our officers and directors from entering into hedging or monetization transactions involving Company stock, such as prepaid variable forward contracts, equity swaps, collars and exchange funds.

Stock Ownership Guidelines and Stock Holding Requirement

The Compensation Committee 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 60% of the vested shares, net of taxes, of Company stock received under awards granted on or after January 1, 2015 until the applicable ownership guideline is met. All named executive officers own shares in excess of the stock ownership guidelines, except for Mr. Hammer who became an employee of the Company in 2018 and is subject to the aforementioned holding requirement.

RESULTS OF SAY ON PAY VOTES AT 2019 ANNUAL MEETING

At the Company's 2019 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 94% of the votes on the matter were cast to approve the Company's executive compensation programs, over 5% of the votes were cast against, and less than 1% abstained from voting.

The Compensation Committee considered the results of the vote, including the appropriateness of the compensation philosophy and objectives, the role of the Compensation Committee and executive officers in setting compensation, the elements used to achieve the compensation philosophy and objectives and the levels of compensation provided to the named executive officers. Following its review, the Compensation Committee decided to retain the Company's general approach to executive compensation in 2020, in part due to the significant majority of stockholders that voted to approve the Company's executive compensation programs at the 2019 annual meeting of stockholders.

In addition, at the Company's 2017 annual meeting of stockholders, the Company held a non-binding stockholder vote on whether to hold a Say on Pay vote every one, two or three years. At that meeting, a majority of our stockholders voted in favor of holding a Say on Pay vote every year, and accordingly, the Company adopted an annual Say on Pay vote frequency. As described in more detail in Proposal No. 2 above, the Company is again holding a Say on Pay vote to approve executive compensation at the 2020 annual meeting of stockholders.


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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the Compensation Discussion and Analysis for executive compensation for 2019 and discussed that analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company's 2019 Annual Report on Form 10-K.

Compensation Committee

Stephen E. Smith (Chairman)
Carmel Galvin
Stefan Jacoby
Mary Ellen Smith


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ANALYSIS OF RISK IN THE COMPANY'S
COMPENSATION STRUCTURE

The Compensation Committee considers the potential risks in our business when designing and administering the Company's pay program, and the Compensation Committee believes its balanced approach to performance measurement and pay delivery works to avoid misaligned incentives for individuals to undertake excessive or inappropriate risk. Further, program administration is subject to considerable internal controls, and when determining the principal outcomes—performance assessments and pay decisions—the Compensation Committee relies on principles of sound governance and good business judgment. As part of its responsibilities to annually review all incentive compensation and equity-based plans, and evaluate whether the compensation arrangements of the Company's employees incentivize unnecessary and excessive risk-taking, the Compensation Committee evaluated the risk profile of all of the Company's compensation policies and practices for 2019.

In its evaluation, the Compensation Committee reviewed the Company's employee compensation structures and noted numerous design elements that manage and mitigate risk without diminishing the incentive nature of the compensation. There is a balanced mix between cash and equity and between annual and longer-term incentives. In addition, annual incentive awards and long-term incentive awards granted to executives are tied to corporate performance goals, including Adjusted EBITDA and Cumulative Operating Adjusted Net Income Per Share (and, for the 2019 PRSUs following the IAA Spin-Off, Operating Adjusted Net Income Per Share). These metrics encourage performance that supports the business as a whole. The executive annual incentive awards include a maximum payout opportunity equal to 150% 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 intentional misconduct. This policy helps to discourage inappropriate risks, as executives will be held accountable for misconduct which is harmful to the Company's financial and reputational health.

The Compensation Committee also reviewed the Company's compensation programs for certain design features that may have the potential to encourage excessive risk-taking, including over-weighting towards annual incentives, highly leveraged payout curves, unreasonable thresholds and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds. The Compensation Committee concluded that the Company's compensation programs (i) do not include such elements; or (ii) have implemented features, steps and controls that are designed to limit risks of our compensation arrangements. In light of these analyses, the Compensation Committee concluded that the Company has a balanced pay and performance program that does not encourage excessive risk-taking that is reasonably likely to have a material adverse effect on the Company.


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SUMMARY COMPENSATION TABLE FOR 2019

The table below contains information concerning the compensation of our named executive officers.

Name and               
Principal
Position(1)
  Year(2)   Salary   Bonus(3)   Stock
Awards(4)
  Non-Equity
Incentive Plan
Compensation(5)
  All Other
Compensation(6)
  Total  

Jim Hallett

  2019   $975,000     $3,900,050   $609,375   $45,003     $5,529,428  
             

Chief Executive Officer

  2018   $975,000     $3,900,032   $1,219,046   $44,148     $6,138,226  
             

and Chairman of the Board

  2017   $900,000     $3,514,776   $1,355,361   $41,739     $5,811,876  

Eric Loughmiller

  2019   $550,000       $1,375,046   $275,000   $20,335     $2,220,381  

Executive Vice President

  2018   $535,577       $918,788   $460,882   $27,045     $1,942,292  

and Chief Financial Officer

  2017   $500,000       $854,324   $456,798   $25,862     $1,836,984  

Peter Kelly

  2019   $576,923     $1,200,031   $300,000   $108,732     $2,185,686  
             

President

                             

John Hammer

  2019   $520,769       $1,287,644   $345,190   $30,585     $2,184,188  

Chief Commercial Officer for

  2018   $432,692   $400,000   $1,125,109   $210,318   $294,981     $2,463,100  

KAR and President of ADESA

                             

Don Gottwald

  2019   $506,423     $625,051   $408,552   $33,100     $1,573,126  
             

Former Chief Strategy Officer

  2018   $583,495     $1,021,164   $589,324   $32,680     $2,226,663  
             

and President of Digital, Data

  2017   $583,495     $996,133   $702,974   $30,870     $2,313,472  

and Mobility Solutions

                             

Becca Polak

  2019   $463,500       $901,293   $115,875   $1,562,482     $3,043,150  

Former Chief Legal Officer

  2018   $515,000       $901,256   $376,484   $30,350     $1,823,090  

and Secretary for KAR and

  2017   $475,000       $811,595   $436,338   $30,150     $1,753,083  

President of TradeRev

                             

(1)
Mr. Gottwald and Ms. Polak resigned from the Company effective April 3, 2020 and October 8, 2019, respectively. Mr. Hammer served as the President of ADESA during 2019 and, effective March 8, 2020, assumed the role of Chief Commercial Officer of the Company in addition to his role as President of ADESA.

(2)
Compensation for Mr. Kelly is provided only for 2019 because he was not a named executive officer for 2018 or 2017. Mr. Hammer joined the Company in 2018.

(3)
The 2018 bonus amount for Mr. Hammer was attributable to a special sign on award, granted to make up for compensation that was forfeited from his previous employer upon joining the Company.

(4)
The amounts reported in this column for 2019 represent the grant date fair value of PRSUs and RSUs granted on February 22, 2019, computed in accordance with ASC 718. See Note 5 to our financial statements for 2019 for information about the assumptions made in determining the grant date fair value. Assuming, instead, that the maximum level of performance would have been achieved with respect to the 2019 PRSU awards, based on grant date value of our common stock, the award that could have been earned at the end of the performance period (excluding dividends) is as follows: Mr. Hallett – $5,850,029; Mr. Loughmiller – $2,062,546; Mr. Kelly – $1,800,045; Mr. Hammer – $1,931,326; Mr. Gottwald – $937,529; and Ms. Polak – $1,351,940. Ms. Polak forfeited her entire 2019 RSU award and a portion of her 2019 PRSU award upon her resignation from the Company on October 8, 2019.

(5)
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.

(6)
The amounts reported for 2019 consist of the following:

Automobile allowance: Mr. Hallett – $25,000; Mr. Kelly – $18,692; Mr. Hammer – $18,000; Mr. Gottwald – $18,000; and Ms. Polak – $13,985.

401(k) matching contributions: Mr. Hallett – $11,200; Mr. Loughmiller – $11,200; Mr. Kelly – $0; Mr. Hammer – $11,200; Mr. Gottwald – $11,200; and Ms. Polak – $11,200.

Company-paid group term life insurance premiums: Mr. Hallett – $7,163; Mr. Loughmiller – $5,940; Mr. Kelly – $1,991; Mr. Hammer – $1,385; Mr. Gottwald – $2,070; and Ms. Polak – $1,090.

Executive physical: Mr. Hallett – $1,640; Mr. Loughmiller – $3,195; Mr. Gottwald – $1,830; and Ms. Polak $1,740.

Relocation expense reimbursement under the Company's mobility program: Mr. Kelly – $88,049 (which includes a tax gross up amount of $38,301).

For Ms. Polak, the amounts reported for 2019 also consist of the following payments that she received in connection with her resignation from the Company: (i) cash severance payment of $1,030,000; (ii) COBRA premiums payment of $4,467; and (iii) consulting fee payment of $500,000 for services provided under her consulting agreement with the Company following her separation.


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GRANTS OF PLAN-BASED AWARDS FOR 2019

The following table summarizes the awards granted to, and the payouts that were achievable for, each of our named executive officers in 2019 under the Annual Incentive Program and the grants of PRSUs and RSUs made under the Omnibus Plan. As further described in the section titled "Compensation Discussion and Analysis—IAA Spin-Off" on page 26, PRSUs and RSUs granted in 2019 were subsequently adjusted in connection with the IAA Spin-Off.

 
   
  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
  Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
   
   
   
Name
(a)
  Grant
Date
(b)
  Threshold
($)(c)(1)
  Target
($)(d)(1)
  Maximum
($)(e)(1)
  Threshold
(#)(f)(2)
  Target
(#)(g)(2)
  Maximum
(#)(h)(2)
  Number of
Securities
Underlying
Restricted
Stock Units
(#)(i)(3)
  Grant Date
Fair Value
of Stock
Awards
($)(j)(4)
   

Jim Hallett

    609,375   1,218,750   1,828,125              
                   

  2/22/2019         31,078   62,155   124,310     2,925,014    
                   

  2/22/2019               20,719   975,036    

Eric Loughmiller

      275,000   550,000   825,000                                  

  2/22/2019                   10,957     21,914     43,828           1,031,273    

  2/22/2019                                     7,305     343,773    

Peter Kelly

    300,000   600,000   900,000              
                   

  2/22/2019         9,563   19,125   38,250     900,023    
                   

  2/22/2019