Document:

Wdesk | Exhibit

INSTRUMENT OF AMENDMENT TO THE
MDU RESOURCES GROUP, INC.
401(k) RETIREMENT PLAN

The MDU Resources Group, Inc. 401(k) Retirement Plan (as amended and restated March 1, 2011) (the “K-Plan”), is hereby further amended, as follows:

		
	1.
	Effective January 1, 2017, by replacing  Section 3.1 Savings Contributions, of Article III, Contributions, in its entirety, with the following:

3.1 Savings Contributions 

		
	(a) 
	Maximum. A Participant may contribute, by payroll deduction, any whole percentage of the Participant’s Compensation for each pay period to the Participant’s Savings Contribution Account, subject to the following maximum percentages: (i) 50% of the Participant’s Compensation if the Participant is not a Highly Compensated Employee, and (ii) 22% of the Participant’s Compensation if the Participant is a Highly Compensated Employee. 

		
	(b) 
	Savings contributions on behalf of a Participant shall constitute Employer contributions to the Plan and shall be credited to such Participant’s Savings Contribution Account, subject to Section 3.5. An Employer may withhold a Participant’s Savings Contributions from any portion of the Participant’s taxable income (without regard to whether such taxable income constitutes “Compensation” under the Plan) so long as the applicable deferral limits set forth in Section 3.1(a) above are not exceeded. 

		
	(c) 
	Upon becoming a Participant, and at any time thereafter, each Participant may elect the percentage of Compensation to be contributed as a Savings Contribution to the Plan. Any such election will take effect as soon as administratively feasible. Each election by a Participant under this Section shall be made pursuant to the method established by the Committee for this purpose. 

		
	(d) 
	Effective September 1, 2007, if a Participant fails to make an election within thirty (30) days of becoming a Participant, the Participant shall be deemed to have elected to have three percent (3%) of Compensation withheld and contributed to the Plan, effective as soon as administratively feasible following the thirty (30) day period. Prior to the date an automatic deferral election is effective, the Participant shall receive a notice that explains the automatic deferral feature, the Eligible Employee’s right to elect not to have Compensation automatically reduced, and the procedure for making an alternate election. An automatic deferral election shall be treated, for all purposes of the Plan, as a voluntary deferral election.

In addition, each Eligible Employee who did not have a Savings Contribution election of at least three percent (3%) of Compensation on file as of May 25, 2007, 

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shall be deemed to have elected to have three percent (3%) of Compensation withheld and contributed to the Plan as Savings Contributions effective as of the first payroll period beginning after the Effective Date, unless prior to August 21, 2007, such Eligible Employee has made an alternate election.

		
	(e) 
	Effective January 1, 2017, if a Participant fails to make an election within thirty (30) days of becoming a Participant, the Participant shall be deemed to have elected to have four percent (4%) of Compensation withheld and contributed to the Plan, effective as soon as administratively feasible following the thirty (30) day period. Prior to the date an automatic deferral election is effective, the Participant shall receive a notice that explains the automatic deferral feature, the Eligible Employee’s right to elect not to have Compensation automatically reduced, and the procedure for making an alternate election. An automatic deferral election shall be treated, for all purposes of the Plan, as a voluntary deferral election.

		
	(f)
	Notwithstanding a Participant’s election under Subsection 3.1(c) or deemed election under Subsection 3.1(d) or (e) above, each Participant who is contributing less than fifteen percent (15%) of Compensation to the Plan on January 16, 2012, and January 1 of each year thereafter, shall be deemed to have elected to increase the Participant’s deferral percentage by one percent (1%) on and after March 1, 2012, and January 1 of each year thereafter; provided, however, that this Subsection 3.1(f) shall not apply to any Participant who has elected to opt out of the automatic deferral escalation feature.

		
	(g) 
	Savings Contributions must be contributed to the Trust Fund as soon as practicable, but in no event later than the fifteenth (15th) business day of the month following the month in which such deferrals were made. Savings Contributions made pursuant to Subsection 3.1(d), (e), or (f) above shall be invested pursuant to Subsection 5.2(a) below.

Explanation: This amendment increases the automatic enrollment deferral rate from 3% to 4% for newly eligible employees, effective January 1, 2017. 

		
	2.
	Effective January 1, 2017, by replacing the final paragraph of the Introduction, in its entirety, with the following:

On February 7, 2013, MDU Resources Group, Inc., through its wholly-owned subsidiary, WBI Energy, Inc., (“WBI Energy”) formed Dakota Prairie Refining, LLC (“Dakota Prairie”). WBI Energy owns 50% of the membership interests of Dakota Prairie and Calumet North Dakota, LLC (“Calumet”) owns 50% of the membership interests of Dakota Prairie. Calumet and consequently Dakota Prairie are not members of the MDU Resources Group, Inc. controlled group of corporations within the meaning of Section 414(b) of the Code. Effective September 9, 2013, Dakota Prairie adopted the Plan for its eligible employees. Thereafter, with respect to Dakota Prairie, the Plan is maintained as a multiple employer plan (as defined in Section 413(c) of the Code) in 

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accordance with Supplement I. On June 28, 2016, Dakota Prairie was sold. Effective January 1, 2017, the Plan shall revert to and be maintained as a single employer plan.

Explanation: This amendment reverts the K-Plan back to a single employer plan, effective January 1, 2017, pursuant to the sale of Dakota Prairie on June 28, 2016.

		
	3.
	Effective January 1, 2016, by deleting the last sentence of the defined term “Investment Funds” in Article I, Definitions.

		
	4.
	Effective January 1, 2016, by adding the following new paragraph (d) to Section 5.2, Investment:

		
	(d)
	One of the Investment Funds shall be a fund invested primarily in Common Stock (the “Common Stock Investment Fund”).  The Common Stock Investment Fund is intended to be a permanent Investment Fund under the Plan, unless the Committee concludes that it is clearly imprudent to continue the Common Stock Investment Fund as an Investment Fund under the Plan.  The Committee will evaluate the prudence of maintaining the Common Stock Investment Fund not on the basis of the risk of the Common Stock Investment Fund standing alone, but in light of the availability of other Investment Funds under the Plan and the ability of Participants and beneficiaries to construct a diversified investment portfolio consistent with their individual desired level of risk and return.  

Explanation: Amendments 3 and 4 reflect a recent best practice with respect to company stock funds.

		
	5.
	Effective June 28, 2016, by removing Supplement D-8, Provisions Relating to the Dakota Prairie Refining, LLC Retirement Contribution Feature, in its entirety.

Explanation: This amendment removes the Retirement Contribution Feature for Dakota Prairie, pursuant to the sale of Dakota Prairie on June 28, 2016.

		
	6.
	Effective January 1, 2017, by adding the following section to Supplement I, Multiple Employer Plan Provisions Applicable Upon Adoption of the Plan by Dakota Prairie Refining, LLC:

I-6  Reversion to Single Employer Plan. Dakota Prairie was sold on June 28, 2016. As a result of this sale, Dakota Prairie is no longer a Participating Affiliate in the Plan. Therefore, effective January 1, 2017, this Supplement I is no longer applicable.

Explanation: This amendment changes Supplement I to reflect that it is no longer applicable, effective January 1, 2017, pursuant to the sale of Dakota Prairie on June 28, 2016.

		
	7.
	Effective January 1, 2017, by replacing Section D-1-2 Eligibility to Share in the Profit Sharing Feature of Supplement D-1, Provisions Relating to the Profit Sharing Feature for Certain Participating Affiliates, in its entirety, with the following: 

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Eligibility to Share in the Profit Sharing Feature.  Participation in the Profit Sharing Feature(s) for any Plan Year is limited to employees of the Supplement D-1 Company who satisfy the Plan’s definition of Eligible Employee (unless otherwise noted below).  The current and original effective dates for each Participating Affiliate’s respective Profit Sharing Feature are listed below.

	
		
	Participating Affiliate
	Current Effective Date
(Original Effective Date)2

	Ames Sand & Gravel, Inc.
	January 1, 2016
(July 16, 2007)

	Anchorage Sand & Gravel Company, Inc. (excluding President)
	January 1, 1999

	Baldwin Contracting Company, Inc.
	January 1, 1999

	Capital Electric Line Builders, Inc.7
	January 1, 2014

	Cascade Natural Gas Corporation1
	January 1, 2017
 (July 2, 2007)

	Concrete, Inc.
	January 1, 2001

	Connolly-Pacific Co.
	January 1, 2007

	DSS Company
	January 1, 2004
(July 8, 1999)

	E.S.I., Inc.
	January 1, 2008
(January 1, 2003)

	Fairbanks Materials, Inc.
	May 1, 2008

	Granite City Ready Mix, Inc.
	June 1, 2002

	Great Plains Natural Gas Co.1
	January 1, 2017
(January 1, 2008)

	Hawaiian Cement (non-union employees hired after December 31, 2005)
	January 1, 2009

	Intermountain Gas Company1
	January 1, 2017
(January 1, 2011)

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	Participating Affiliate
	Current Effective Date
(Original Effective Date)2

	JTL Group, Inc.5/6
	January 1, 2015
(January 1, 2014)

	Jebro Incorporated
	November 1, 2005

	Kent’s Oil Service4
	January 1, 2007

	Knife River – North Dakota Division, a Division of Knife River Corporation – North Central
	January 1, 2016
(January 1, 2007)

	Knife River Corporation – North Central
	January 1, 2016
(January 1, 2007)

	Knife River Corporation – Northwest (the Central Oregon Division, f/k/a HTS)
	January 1, 2010
(January 1, 1999)

	Knife River Corporation – Northwest (the Idaho Division)
	January 1, 2015

	Knife River Corporation – Northwest (the Southern Oregon Division)
	

January 1, 2012

	Knife River Corporation – Northwest (the Western Oregon Division)
	

January 1, 2012

	Knife River Corporation - South
(f/k/a Young Contractors, Inc.)
	January 1, 2008
(January 1, 2007)

	Knife River Midwest, LLC
	January 1, 2016
(April 1, 2004)

	LTM, Incorporated
	January 1, 2003

	MDU Resources Group, Inc.1
	January 1, 2017

	Montana-Dakota Utilities Co. 
(non-union employees)1
	January 1, 2017
(January 1, 2008)

	Montana-Dakota Utilities Co.
(union employees)
	January 1, 2008

	Northstar Materials, Inc.
	January 1, 2016
(January 1, 2003)

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	Participating Affiliate
	Current Effective Date
(Original Effective Date)2

	On Electric Group, Inc.3
	March 7, 2011

	Wagner Industrial Electric, Inc.
	

January 1, 2008

	Wagner Smith Equipment Co.
	January 1, 2008
(July 1, 2000)

	WBI Energy, Inc.1
	January 1, 2017
(May 1, 2012)

	

WBI Energy Midstream, LLC1
	January 1, 2017
 (January 1, 2001)

	WBI Energy Transmission, Inc.1
	January 1, 2017
 (January 1, 2009)

	WHC, Ltd.
	September 1, 2001

1/Eligible employees only include those in salary grade levels 29-38.
2/In the event a Participating Affiliate adopts a Profit Sharing Feature on a date other than January 1, effective as of the date of participation in the Plan, the amount of any such contribution allocated to a Supplement D‐1 Participant shall be based upon Compensation, received while in the employ of the Participating Affiliate after the date of acquisition by the Company or any Affiliate. 
3/Requirement to be an Active Employee on the last day of the Plan Year does not apply.
4/The following participant of Kent’s Oil Service is granted vesting service for prior years of service with Spirit Road Oils: Jose Padilla.
5/Eligible JTL Casper hourly employees (both union and nonunion), including those employees who participate in the Operating Engineers Local No. 800 & The Wyoming Contractors’ Association, Inc. Pension Trust Fund for Wyoming (JTL MEP employees.)
6/Eligible salaried employees of JTL hired after December 31, 2014 or any other JTL employee who transfers to a salaried position after December 31, 2014.
7/Eligible employees participating in a management incentive compensation plan are not eligible for a Profit Sharing Contribution.

In order to share in the allocation of any profit sharing contribution made by a Supplement D-1 Company pursuant to Paragraph 3 below for a given Plan Year, Participants employed by a Supplement D-1 Company must be credited with 1,000 Hours of Service (prorated for the Plan Year in which the Profit Sharing Feature becomes effective) in that Plan Year, be an Active Employee of the Supplement D-1 Company on the last day of the Plan Year, and must not be covered by a collectively bargained unit to which the Profit Sharing has not been extended.

However, an Eligible Employee of a Knife River Corporation Participating Affiliate who transfers during the Plan Year and remains employed by a Knife River Corporation Participating Affiliate on the last day of the Plan Year will be eligible to receive a prorated profit sharing contribution from each Knife River Corporation Participating 

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Affiliate.

Moreover, effective January 1, 2009, an Eligible Employee of Montana‐Dakota Utilities Co., Great Plains Natural Gas Co.,  Intermountain Gas Company, or Cascade Natural Gas Corporation (collectively the “Utility Group Participating Affiliate”) who transfers during the Plan Year and remains employed by a Utility Group Participating Affiliate on the last day of the Plan Year will be eligible to receive a prorated profit sharing contribution from each Utility Group Participating Affiliate noted above which meets its independent profitability targets.  

Effective January 1, 2014, it was resolved that Profit Sharing contributions for Eligible Employees of the Utility Group Participating Affiliates would be based upon the Utility Group Participating Affiliates combined profitability targets, and therefore, if the Utility Group Participating Affiliates together attained the required profitability, Eligible Employees of the Utility Group Participating Affiliates would receive a contribution as long as they remained employed by a Utility Group Participating Affiliate on the last day of the Plan Year.  

Notwithstanding the foregoing and except as noted herein, effective January 1, 2017, MDU Resources Group, Inc., Montana-Dakota Utilities Co., Intermountain Gas Company, Cascade Natural Gas Corporation, Great Plains Natural Gas Co., WBI Energy, Inc., WBI Energy Midstream, LLC, and WBI Energy Transmission, Inc. (collectively the “Regulated Group Participating Affiliates”) will provide a Profit Sharing contribution to Eligible Employees who are classified in salary grade levels 29‐38, or a prorated Profit Sharing contribution to Eligible Employees who transfer in or out of salary grade levels 29-38, provided the profitability target is met and they remain employed by a Regulated Group Participating Affiliate as of the last day of the Plan Year. Profit Sharing contributions for Eligible Employees of MDU Resources Group, Inc. will be based on an independent earnings per share target. Profit sharing contributions for Eligible Employees of WBI Energy, Inc., WBI Energy Midstream, LLC, and WBI Energy Transmission, Inc. will be based on a combined profitability target. Employees of the WBI Energy Corrosion Services division of WBI Energy Midstream, LLC are not eligible to receive Profit Sharing contributions. Profit Sharing contributions for Eligible Employees of the Utility Group Participating Affiliates (other than union employees of Montana-Dakota Utilities Co.) will be based on the Utility Group Participating Affiliates combined profitability targets. Profit Sharing contributions for union Eligible Employees of Montana‐Dakota Utilities Co., regardless of salary grade level, shall be determined based solely on the profitability of Montana‐Dakota Utilities Co.  

For purposes of this Supplement, an “Active Employee” means an employee who is still on the payroll, has been temporarily laid off, or who terminated employment due to Disability, death, or after attaining age 60 during such Plan Year, but does not mean an employee whose employment has been terminated effective on or before December 31 of that Plan Year.  In addition, for purposes of applying the requirement of completing 1,000 Hours of Service for the Plan Year, such requirement shall not apply to employees terminating after attaining age 60 provided they are not terminated for cause.

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Participants who meet the preceding requirements are referred to herein as “Supplement D-1 Participant.”

Explanation: This amendment adds a profit sharing contribution for MDU Resources Group, Inc. based on MDU Resources Group, Inc.’s independent earnings per share target, provides profit sharing to Eligible Employees of WBI Energy, Inc., WBI Energy Midstream, LLC, and WBI Energy Transmission, Inc. only if they remain employed as of the last day of the Plan Year, clarifies that union employees at Montana-Dakota Utilities Co. will have an independent profitability target and that the eligibility of such employees will not be based on salary grade level, clarifies the profitability targets for the regulated entities, and limits eligibility for employees of the regulated entities to employees in salary grade levels 29-38, all effective January 1, 2017.

IN WITNESS WHEREOF, MDU Resources Group, Inc., as Sponsoring Employer of the K-Plan, has caused this amendment to be duly executed by a member of the MDU Resources Group, Inc. Employee Benefits Committee on this 29th day of December, 2016.

MDU RESOURCES GROUP, INC.
EMPLOYEE BENEFITS COMMITTEE

By  /s/ Doran N. Schwartz
Doran N. Schwartz, Chairman

8Exhibit

EXHIBIT 10.9a
EMPLOYMENT AGREEMENT 

This Employment Agreement (this “Agreement”), dated and effective December 17, 2013 (“Effective Date”), is entered into by and between KAR Auction Services, Inc. (“Employer”) and Peter Kelly (“Employee”).
RECITALS
A.    Employer desires to employ Employee as its Chief Technology Officer pursuant to the terms and conditions set forth in this Agreement.
B.    Employee desires to accept such employment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.     Employment Period.  The period of employment of Employee by Employer hereunder shall commence on the Effective Date and continue thereafter until terminated pursuant to Section 4 of this Agreement (the “Employment Period”).
2.     Title and Duties.  During the Employment Period, Employee shall serve as the Chief Technology Officer of Employer and shall perform the duties and responsibilities inherent in such position and any other duties consistent with such position as may be reasonably assigned to Employee from time to time by Employer’s Chief Executive Officer or Board of Directors of Employer (“Board”).  Employee shall perform the duties of this position in a diligent and competent manner and on a full-time basis during the Employment Period.
3.     Compensation and Benefits.
(a)    Base Salary.  During the Employment Period, Employee shall be paid an annual base salary of $388,640 (“Base Salary”), less withholdings and deductions required by law or requested by Employee.  Employee’s Base Salary may be adjusted but may not be adjusted downward except in connection with across-the-board base salary reductions, by the Board from time to time.
(b)    Business Expenses.  Employer shall reimburse Employee for all reasonable business expenses incurred in performing services pursuant to this Agreement upon Employee’s presentation to Employer, on a timely basis, of satisfactory documentation of such expenditures.  Such expenses shall be reimbursed as soon as administratively feasible, but in no event later than the end of the calendar year following the calendar year in which the applicable expense was incurred.  Notwithstanding the foregoing, all such expenses shall be reimbursed upon any termination of Employee’s employment under this Agreement, including without limitation a termination for Cause.

 

(c)    Annual Bonuses.  In addition to Base Salary, Employee shall be eligible to participate in the KAR Auction Services, Inc. Annual Incentive Plan (the “Bonus Plan”) (as in effect from time to time).  Except as provided in Section 4 and Section 5 below, payment to Employee of any amounts under the Bonus Plan shall be subject to Employee’s continued employment with Employer through December 31 of the calendar year to which such bonus relates.  Payment of any bonus pursuant to the Bonus Plan shall be made as soon as practicable but in no event later than March 15 of the year following the calendar year to which such bonus relates.
(d)    Equity.      Employee shall be eligible to participate in all Employer incentive programs extended to executive-level employees of Employer generally at levels commensurate with Employee’s position, including without limitation the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan.
(e)    Employee Benefits.  Employee shall be eligible to participate in Employer’s health and welfare benefit programs, 401(k) benefit program, life and disability insurance programs, and any other employee benefits, benefit plans, policies or programs Employer provides to its executive-level employees, in each case, as they may exist from time to time and subject to the terms and conditions thereof.  Nothing in this Agreement shall require Employer to maintain any benefit plan, or shall preclude Employer from terminating or amending any benefit plan from time to time.
(f)    Vacation and Holidays.  During the Employment Period, Employee shall be entitled to annual paid vacation in accordance with Employer’s policy applicable to executive-level employees, but in no event less than four (4) weeks of paid vacation during each full calendar year of employment.  Employee shall receive a pro-rated portion of such vacation during Employee’s initial and final partial calendar years of employment under this Agreement.  Unused, earned vacation shall not carry over from one calendar year to the next, unless Employer’s written policies otherwise provide for such carry over.  Upon termination of Employee’s employment for any reason, Employer shall pay Employee for any unused, earned vacation days based upon Employee’s then current Base Salary.  Employee shall also be entitled to all of the paid holidays recognized by Employer generally.
(g)    Automobile Allowance.  During the Employment Period, Employer shall pay Employee an annual automobile allowance of at least Eighteen Thousand Dollars ($18,000).  Such allowance shall be paid in accordance with Employer’s regular payroll practices, as may be in effect from time to time, but in no event less frequently than monthly.
4.     Termination.  
(a)    Termination by Employer for Cause.  Employer may terminate Employee’s employment under this Agreement at any time for Cause after the Board, by the majority vote of its members (excluding, for this purpose, any employee member of the Board, if applicable) determines that the actions or inactions of Employee constitute Cause, and Employee’s employment should accordingly be terminated for Cause.  In the 

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event of a termination of Employee by Employer for Cause, Employee or Employee’s estate, if applicable, shall be entitled to receive: (i) Employee’s accrued Base Salary through the termination date, paid within 30 days of the termination date; (ii) an amount for reimbursement, paid within 30 days following submission by Employee to Employer of appropriate supporting documentation for any unreimbursed business expenses properly incurred prior to the termination date by Employee pursuant to Section 3(b) and in accordance with Employer’s policy; (iii) any accrued and unpaid vacation pay, paid within 30 days of the termination date; and (iv) such employee benefits, if any, to which Employee or Employee’s dependents may be entitled under the employee benefit plans or programs of Employer, paid in accordance with the terms of the applicable plans or programs (the amounts described in clauses (i) through (iv) hereof being referred to as “Employee’s Accrued Obligations”).
For purposes of this Agreement, “Cause” means (A) Employee’s willful, continued and uncured failure to perform substantially Employee’s duties under this Agreement (other than any such failure resulting from incapacity due to medically documented illness or injury) for a period of fourteen (14) days following written notice by Employer to Employee of such failure, (B) Employee engaging in illegal conduct or gross misconduct that is demonstrably likely to lead to material injury to Employer, monetarily or otherwise, (C) Employee’s indictment or conviction of, or plea of nolo contendere to, a crime constituting a felony or any other crime involving moral turpitude, or (D) Employee’s violation of Section 7 of this Agreement or any other covenants owed to Employer by Employee.
(b)    Termination by Employer without Cause.  Employer may terminate Employee’s employment under this Agreement without Cause at any time upon thirty (30) days’ prior written notice to Employee.  In addition to the severance benefits provided in Section 5, in the event of Employee’s termination by Employer without Cause, Employer shall pay to Employee all of Employee’s Accrued Obligations.
(c)    Termination by Employee for Good Reason.  Employee may terminate Employee’s employment under this Agreement for Good Reason.  For purposes of this Agreement, “Good Reason” means the occurrence of any of the following:
(i)    Any material reduction of Employee’s authority, duties and responsibilities; 
(ii)    Any material failure by Employer to comply with any of the terms and conditions of this Agreement; 
(iii)    Any failure to timely pay or provide Employee’s Base Salary, or any reduction in Employee’s Base Salary, excluding any Base Salary reduction made in connection with across the board salary reductions; 
(iv)    The requirement by Employer that Employee relocate Employee’s principal business location to a location more than fifty (50) miles from Employee’s principal base of operation as of the Effective Date; or

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(v)    A Change of Control occurs and, if applicable, Employer fails to cause its successor (whether by purchase, merger, consolidation or otherwise) to assume or reaffirm Employer’s obligations under this Agreement without change.  For purposes of this Agreement, “Change of Control” shall have the meaning assigned to such term under the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan.
Within ninety (90) days of the occurrence of a Good Reason event, Employee may provide Employer with written notice of Employee’s termination of employment to be effective thirty (30) days after delivery of such notice, during which Employer shall have the opportunity to cure such Good Reason event.  In the event of a termination for Good Reason, in addition to the severance benefits provided in Section 5, Employer shall pay to Employee all of Employee’s Accrued Obligations.
(d)    Termination by Employee without Good Reason.  Employee may terminate Employee’s employment under this Agreement at any time without Good Reason, upon thirty (30) days’ prior written notice to Employer.  In the event of a termination described in this Section 4(d), Employer shall pay to Employee all of Employee’s Accrued Obligations.
(e)    Termination due to Employee’s death or Disability.  Employee’s employment under this Agreement shall terminate upon Employee’s (i) death, or (ii) “Disability,” which for purposes of this Agreement means a “Total Disability” (or equivalent) as defined under Employer’s Long Term Disability Plan in effect at the time of the Disability.  In the event of a termination described in this Section 4(e), Employer shall pay to Employee all of Employee’s Accrued Obligations.  In addition, (i) if Employee is participating in the health plans of Employer at the time of termination, Employer shall pay to Employee the premiums attributable to maintaining Employee’s (and Employee’s qualified beneficiaries’) insurance coverage under the Consolidated Omnibus Budget Reconciliation Act until the earlier of (A) the date that is twelve (12) months following the date of termination and (B) the date Employee is or becomes eligible for comparable coverage under health plans of another employer (the “Continued Benefits”), (ii) Employer shall pay to Employee (or Employee’s estate and/or beneficiaries), in a lump sum following effectiveness of the release described in Section 6 and at the same time Employer pays annual bonuses for such calendar year to its other executives, an amount equal to (x) the actual bonus Employee would have received under the Bonus Plan had Employee remained employed by Employer through the remainder of the calendar year in which termination occurred, multiplied by (y) a fraction, the numerator of which is the number of days Employee was employed in the calendar year in which termination occurred and the denominator of which is 365 and (iii) Employer shall pay to Employee (or Employee’s estate and/or beneficiaries) an amount equal to any annual bonus for a prior completed calendar year that is yet to be calculated and/or paid to Employee, paid as soon as practicable following effectiveness of the release described in Section 6 but in no event later than March 15 of the year following the calendar year to which such bonus relates (the “Earned But Unpaid Bonus”).

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5.     Severance Benefits.  In the event of a termination of Employee’s employment under Section 4(b) or 4(c) of this Agreement, Employer shall provide Employee with the following severance benefits:
(a)    Employer shall pay to Employee an amount equal to the sum of (i) Employee’s annual Base Salary and (ii) Employee’s bonus at target for the year in which termination occurs, which shall be paid by Employer to Employee in a lump sum as soon as practicable following (and subject to) effectiveness of the release described in Section 6 but in no event later than sixty (60) days following the date of termination, provided that if such sixty (60) day period covers two taxable years, payment shall be made in the second taxable year.
(b)    The Continued Benefits; and
(c)    The Earned But Unpaid Bonus.
6.     Release of Claims.  As a condition to the receipt of any payments or benefits described in Section 5 of this Agreement, subsequent to the termination of the employment of Employee (other than any Accrued Benefits or any payment or benefits payable on account of Employee’s death), Employee shall be required to execute, and not subsequently revoke, within fifty (50) days following the termination of Employee’s employment a release, in a form reasonably satisfactory to Employer, of all claims arising out of or related to Employee’s employment or the termination thereof.  
7.     Restricted Activities.
(a)    Acknowledgements.  Employee understands and acknowledges that Employer has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of wholesale, retail or consumer vehicle remarketing, including but not limited to vehicle auctions (whole car and salvage), online services, or dealer floor-plan financing.  Employee understands and acknowledges that as a result of these efforts, Employer has created, and continues to use and create, Confidential Information (as defined below) and that such Confidential Information is integral to providing Employer with a competitive advantage over others in the marketplace.  Employee further understands and acknowledges that the nature of Employee’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with Employer.
(b)    Confidential Information.  Employee acknowledges and agrees that Confidential Information is the property of Employer, and that Employee shall not acquire any ownership rights in Confidential Information.  Employee (i) shall use Confidential Information solely in connection with Employee’s employment with Employer; (ii) shall not directly or indirectly disclose, use or exploit any Confidential Information for Employee’s own benefit or for the benefit of any person or entity, other than Employer, both during and after Employee’s employment with Employer; and 

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(iii) shall hold Confidential Information in trust and confidence, and use all reasonable means to assure that it is not directly or indirectly disclosed to or copied by unauthorized persons or used in an unauthorized manner, both during and after Employee’s employment with Employer.  To the extent that Employee creates or develops any Confidential Information during the course of Employee’s employment with Employer, it shall be the sole and exclusive property of Employer.  For purposes of this Agreement, “Confidential Information” shall mean any proprietary, confidential and competitively-sensitive information and materials which are the property of Employer, excluding information and materials generally known or available to the public, other than as a result of Employee’s breach of this Section 7, and including without limitation (A) trade secrets, (B) business and technical information that gives Employer a competitive advantage, and (C) information concerning Employer’s customers, suppliers, vendors, licensors, affiliates, financing sources, profits, revenues, financial condition, pricing, training programs, service techniques, service processes, marketing plans, and business strategies.
(c)    Intellectual Property.  Employee agrees to promptly disclose to Employer and hereby assigns and agrees to assign, without further compensation, to Employer, Employee’s entire right, title and interest in each and every invention (whether or not patentable), technological innovation, and copyrightable work, in which Employee participates during Employee’s employment with Employer whether or not during working hours, that pertains to Employer’s business or is aided by the use of time, material, or facilities of Employer.  Employee further agrees to perform all reasonable acts, including executing necessary documents, requested by Employer to assist it, without further compensation, in obtaining and enforcing its property rights in the above.
(d)    Non-Solicitation/Non-Interference.  During Employee’s employment with Employer and for a period of one (1) year immediately following the termination of Employee’s employment for any reason, Employee shall not (i) induce or attempt to induce any employee of Employer to leave the employ of Employer, or in any way interfere with the relationship between Employer and any of its employees, or (ii) induce or attempt to induce any customer, client, member, supplier, licensee, licensor or other business relation of Employer to cease doing business with Employer, or otherwise interfere with the business relationship between Employer and any such customer, client, member, supplier, licensee, licensor or business relation of Employer.
8.     Section 409A.  The payments and benefits under this Agreement and the terms of any release agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and the regulations promulgated thereunder (“Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement and any release agreement shall be interpreted and administered consistent with such intent.  If under this Agreement, an amount is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payments.  Without limiting the foregoing, solely to the extent required to avoid the imposition of any additional tax or interest to the Employee under Section 409A, any payments, benefits and other obligations under this Agreement that arise in connection with Employee’s “termination of employment,” “termination” or similar 

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reference in this Agreement shall be triggered only if such termination of employment qualifies as a “separation from service” within the meaning under Section 409A.  Notwithstanding any other provision of this Agreement, if at the time of the termination of Employee’s employment, Employee is a “specified employee,” for purposes of Section 409A, and any payments or benefits upon such termination including but not limited to payments or benefits under this Agreement would otherwise result in additional tax or interest to the employee under Section 409A, Employee will not be entitled to receive such payments or benefits until the date that is six (6) months after the termination of the Employee’s employment for any reason, subject to earlier immediate payment if the employee dies during such six (6) month period.  To the extent required to avoid the imposition of any additional tax or interest under Section 409A, amounts reimbursable to under this Agreement shall be paid to Employee on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to Employee) during any one year may not affect amounts reimbursable or provided in any subsequent year.  If any provision of this Agreement would subject Employee to any additional tax or interest under Section 409A, then Employer shall use its best efforts to amend such provision; provided that Employer shall not incur any additional expense as a result of such amendment.  Notwithstanding any other provision hereof, in no event shall Employer be liable for, or be required to indemnify Employee for, any liability of Employee for taxes or penalties under Section 409A.
9.     Arbitration.  Any dispute, controversy or claim arising out of or relating to this Agreement, the breach, termination, enforcement, interpretation, or validity thereof (including the determination of the scope or applicability of this arbitration agreement), or its subject matter shall be subject and resolved by binding arbitration administered by a single arbitrator from the American Arbitration Association.  The parties acknowledge and agree that Employer is involved in transactions involving interstate commerce and that the Federal Arbitration Act shall govern any arbitration pursuant to this Agreement.  Such arbitration shall be conducted in accordance with the commercial rules and regulations promulgated by the American Arbitration Association applying the laws of the State of Indiana.  The arbitration shall be conducted in Indianapolis, Indiana.  Discovery shall be completed within ninety (90) days of the filing of the complaint and the arbitration shall be held no later than one hundred twenty (120) days after the filing of the complaint.  A record of the proceedings shall be kept by a qualified court reporter.  The decision of the arbitrator shall contain findings of fact and conclusions of law, and shall be made within thirty (30) days of the arbitration and shall be final and binding on the parties, and shall be unappealable.  The decision may be enforced in any court having jurisdiction over the parties and the subject matter.  Costs of the arbitrator shall be split equally between Employer and Employee.
10.    Miscellaneous Provisions.
		
	(a)
	Notices.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

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To Employer:        KAR Auction Services, Inc.
13085 Hamilton Crossing Blvd.
Carmel, IN  46032
Attention:  Rebecca C. Polak, Esq.
Email:  becca.polak@karauctionservices.com

To Employee:        At Employee’s address on file with Employer
                    
(b)    Entire Agreement.  This Agreement sets forth the entire agreement between Employer and Employee with respect to the subject matter of this Agreement and fully supersedes all prior negotiations, representations and agreements, whether written or oral, between Employer and Employee with respect to the subject matter of this Agreement, including, but not limited to, that certain Severance and Consulting Agreement, as amended, dated as of August 25, 2011, between ADESA, Inc. and Employee.
(c)    Severability.  The provisions of this Agreement are severable and shall be separately construed.  If any of them is determined to be unenforceable by any court, that determination shall not invalidate any other provision of this Agreement.
(d)    Amendment and Waiver.  This Agreement may not be modified, amended or waived in any manner except by a written document executed by Employer and Employee.  The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver or a waiver of any subsequent breach by such party of a provision of this Agreement.
(e)    No Mitigation.  In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Employee obtains other employment.
(f)    Successors and Assigns.  This Agreement and the covenants herein shall extend to and inure to the benefit of the successors and assigns of Employer.  Employer shall require any successor (whether by purchase, merger, consolidation or otherwise) to assume or reaffirm, as applicable, Employer’s obligations under this Agreement without change.  Failure of Employer to obtain such an assumption shall entitle Employee to terminate Employee’s employment under this Agreement for Good Reason.
(g)    Headings.  Numbers and titles to Sections hereof are for information purposes only and, where inconsistent with the text, are to be disregarded.
(h)    Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together, shall be and constitute one and the same instrument.

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(i)    Governing Law and Forum.  This Agreement shall be governed by and construed according to the internal laws of the State of Indiana, without regard to conflict of law principles.
[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.
	
		
	“Employer”
	“Employee”

	 
	 

	KAR AUCTION SERVICES, INC.
	 

	 
	 

	 
	 

	 
	 

	By:    /s/ James P. Hallett                  
	      /s/ Peter Kelly         

	 
	 

	Printed:     James P. Hallett              
	 

	 
	 

	Title:     Chief Executive Officer

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