Document:

Exhibit

EXHIBIT 10.12

        

KAR Auction Services, Inc.
Annual Incentive Program
Summary of Terms
2018

KAR Auction Services, Inc. Annual Incentive Program

Summary of Terms

The following is a summary of the 2018 KAR Auction Services, Inc. Annual Incentive Program (the “Program”) which is part of the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan, as amended and restated on June 10, 2014 (the “Omnibus Plan”).  Any awards under the Program are subject to the approval of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of KAR Auction Services, Inc. (the “Company”).  The Committee has all final authority with respect to administration and interpretation of the Program.  All capitalized terms herein that are not otherwise defined shall have the meanings given to such terms in the Omnibus Plan.

Purpose of the Program

The purpose of the Program is to reward eligible employees of the Company with incentive compensation based on their contributions toward meeting and exceeding overall Company goals.

Eligibility

Key employees of the Company may participate in the Program as determined by the Committee.  

Effective Date

The Program is effective January 1, 2018.  The Company reserves the right to revise or terminate the Program at any time, with or without advance notice, in accordance with applicable law.

Performance Period

Each performance period under the Program will be one year in duration and will coincide with the Company's fiscal year (January 1 - December 31).  

Awards

The award is tied to personal performance as well as the financial performance of the Company or particular business unit, division, region or individual site during the performance period.  The award opportunity is expressed as a percentage of base salary, which typically will be determined at the end of the performance period.  

The award is tied to specific “threshold,” “target” and “superior” performance goals.  The “threshold” is the minimum performance goal that must be met before any award is earned.  The “target” opportunity represents the award amount received if the Company meets its targeted financial and, if applicable, non-financial goals.  The “superior” opportunity represents the maximum performance goal that must be met for a maximum payout.  The actual award opportunities at threshold, target and superior levels of performance are set forth in an individual’s personalized incentive compensation statement.  The award is conditioned on satisfactory performance of job responsibilities.

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Performance Goals and Targets

Through the annual planning process, performance goals and targets are established.  The performance goals and targets chosen for the Company, each business unit, division, region and site reflect the Company’s strategy, competitive situation and market potential.  The award may be weighted on a combination of the overall performance of the Company, business unit, division, region or site.  Actual performance goals and goal definitions are included with the personalized incentive compensation statement materials. 

Calculation of Awards

In calculating your award, actual base salary during the Program year will be utilized.  Please note that if your salary or bonus opportunity changes during the Program year your award will be prorated as explained in the examples below.

Example One:  Employee is bonus eligible with a base salary of $40,000 with a target opportunity of 20% and receives a merit increase of 2% on 7/1/2018.  Bonus calculation would be as follows: 

$40,000 x 20% = $8,000 (target award) x performance factor x goal weighting x proration 6/12ths 
plus
$40,800 x 20% = $8,160 (target award) x performance factor x goal weighting x proration 6/12ths 

Example Two:  Employee is bonus eligible with a base salary of $40,000 with a target opportunity of 20% and receives a promotion on 7/1/2018 with a base salary of $45,000 and a target opportunity of 25%.  Bonus calculation would be as follows:

$40,000 x 20% = $8,000 (target award) x performance factor x goal weighting x proration 6/12ths 
plus
$45,000 x 25% = $11,250 (target award) x performance factor x goal weighting x proration 6/12ths 

The performance factor is directly related to financial performance relative to the established threshold, target and superior performance goals.  If actual financial results fall between the threshold, target or superior performance levels, straight-line interpolation will be used to determine the performance factor.  Multiple goal weightings must add to 100%.

Payment of Awards

Generally, all awards are paid out annually; however, certain non-executive officer positions, if approved by the Committee and the applicable business unit president, may be paid out quarterly or semiannually.  

Generally, all awards will be paid out in cash, net of applicable withholding taxes.  While awards are generally paid as soon as practicable after the audited financial results are available for the performance period, in the Committee’s sole discretion, payments to participants other than executive officers of the Company may be based on an estimation of the audited financial results.  Additionally, awards may be paid in one or more installments, in the Committee’s sole discretion. 

In no event will any portion of any awards payable under the Program (including any pro rata awards paid upon certain terminations of employment described below and any installments) be paid later than March 15, 2019.

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Discretionary Adjustment of Awards

The Committee retains discretion to adjust payouts up or down on a case-by-case basis. Individual award payouts may be adjusted downward or eliminated entirely due to personal performance of job responsibilities and/or noncompliance with corporate policy or controls.

In addition, consistent with the terms of the Omnibus Plan, as applicable, the Committee may adjust any or all financial goals during performance period to reflect unforeseen, unusual or extraordinary events or circumstances including but not limited to (i) changes in accounting principles or practices, (ii) extraordinary gains or losses on the sale of assets, (iii) new or amended laws or regulations, and (iv) acquisitions or divestitures.

The Committee also has the authority to impose such other limitations on awards as it may deem necessary or appropriate.

Prorated Awards

In the event that an individual transfers between business units or is promoted during the course of a performance period, a prorated award may be earned based on the time spent in each position.  

All eligible employees hired or promoted on or before the 15th of the month will be prorated based on the number of months of Program eligibility, including the month of hire.

All eligible employees hired or promoted on or after the 16th of the month will be eligible to participate in the Program at the beginning of the following month. 

All eligible employees hired on or after November 1st of the current year will not be eligible to participate in the Program until the beginning of the next Program year.

Termination of Employment

Forfeiture

Generally, upon termination of employment for any reason, the individual will forfeit any award that has not been paid.

Retirement, Disability or Death

In the event that employment is terminated as a result of retirement (defined below), disability (defined below) or death, the award will be prorated based on the number of months employed during the performance period prior to the termination of employment and based on and subject to actual performance during the performance period, in accordance with the Program.  Payment will be paid as soon as practicable in the following year after the audited financial results are available for the performance period, but in no event later than March 15, 2019.  In the event of death, the award will be paid to the individual’s beneficiary or, if no beneficiary is named, to their estate.

For purposes of the Program: (i) retirement shall mean a termination of a participant’s employment, other than for Cause, on or after the attainment of age 65, and (ii) disability shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment for the period of time as set forth under the long term disability program maintained by the Company for the benefit of the participant. 

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Voluntary Termination or Termination by the Company 

In the event that a participant voluntarily terminates from employment or is involuntarily terminated by the Company, the participant will forfeit any award that has not been paid, in accordance with the Program.  In other words, a participant must be employed by the Company on the date the award is actually paid by the Company.

Termination or Modification of the Program

The Committee may modify or terminate the Program at any time, effective at such date as the Committee may determine.  The Committee or Board may, prior to the end of the Program year, adopt a resolution fixing a minimum aggregate amount, which amount is in the Committee or Board’s discretion (a “Pool”), to be paid to participants under the Program for 2018.  After such a Pool is established, (i) the Program may not be modified or terminated and the amount of the Pool may not be reduced after December 31, 2018, and (ii) any amounts forfeited by individual participants hereunder because they are not employed as of the payment date will not reduce the Pool but will be reallocated among other participants in the Program, and shall not revert to the Company.

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EXHIBIT 10.33
KAR Auction Services, Inc.

2009 OMNIBUS STOCK AND INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT
2018 AWARD

THIS AGREEMENT (the “Agreement”) is made between KAR Auction Services, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Recipient”) pursuant to the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan, as amended (the “Plan”).  Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Plan.  The parties hereto agree as follows:

1.    Grant of Restricted Stock Units.  The Company hereby grants to the Recipient [_______] Restricted Stock Units (the “Award”) as of [___________], 2018 (the “Grant Date”), subject to the terms and conditions of the Plan and this Agreement.  The Restricted Stock Units shall vest pursuant to the terms of this Agreement. A “Restricted Stock Unit” is an “Other Share-Based Award” under the Plan and each Restricted Stock Unit entitles the Recipient to a share of Common Stock upon vesting subject to the terms of this Agreement.
2.    Restrictions.  The Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, whether voluntarily or involuntarily or by operation of law.  The Recipient shall have no rights in the Common Stock underlying the Restricted Stock Units until the Award vests as described in Section 4 below or as otherwise provided in the Plan or this Agreement.  The Recipient shall not have any voting rights with respect to the Restricted Stock Units.
3.    Restricted Stock Unit Account.  The Company shall maintain an account (the “Restricted Stock Unit Account” or “Account”) on its books in the name of the Recipient, which shall reflect the number of Restricted Stock Units awarded to the Recipient.
4.    Period of Restriction.  Subject to the Recipient’s continuous employment with the Company through the following dates and the other provisions of the Plan and this Agreement, unless vested or forfeited earlier as described in Section 5 or 6 of this Agreement, as applicable, (i) one-third (1/3) of the Award shall become vested on the first anniversary of the Grant Date, (ii) an additional one-third (1/3) of the Award shall become vested on the second anniversary of the Grant Date and (iii) the final one-third (1/3) of the Award shall become vested on the third anniversary of the Grant Date.
Upon vesting, all vested Restricted Stock Units shall cease to be considered Restricted Stock Units, subject to the terms and conditions of the Plan and this Agreement, and the Recipient shall be entitled to receive one share of Common Stock for each vested Restricted Stock Unit in the Recipient’s Restricted Stock Unit Account. Such shares of Common Stock shall be paid to the 

Recipient as soon as practicable after the vesting date, but in no event later than March 15 of the year following the year in which the shares became vested.
5.    Termination of Employment.  
(a)    If, from the Grant Date until the third anniversary of the Grant Date, the Recipient experiences a termination of employment with the Company and its Affiliates on account of the Recipient’s death or Disability, then all unvested Restricted Stock Units outstanding as of the date of such termination of employment shall immediately vest in full.
(b)    If, from the Grant Date until the third anniversary of the Grant Date, the Recipient experiences a termination of employment with the Company and its Affiliates by reason of the Recipient’s Retirement or Early Retirement Date (as defined below), then all unvested Restricted Stock Units that would have vested in the 12 months following his or her termination date will immediately vest, with (1) all Restricted Stock Units vesting that were scheduled to vest on the first anniversary of the Grant Date occurring in such 12 month period and (2) a pro rata amount of the Restricted Stock Units vesting that were scheduled to vest on the next anniversary of the Grant Date occurring thereafter (if any), equal to (A) the total number of unvested Restricted Stock Units that would have vested on such anniversary of the Grant Date, multiplied by (B) a fraction, the numerator of which is the number of full calendar months after the anniversary of the Grant Date described in (1) above, once the additional 12 months of post-termination vesting credit has been applied, and the denominator of which is 12.  For purposes of clarity and as an example of the application of the additional 12 months of vesting credit described above, if a Recipient terminates employment by reason of Retirement or an Early Retirement Date 18 months after the Grant Date, the Recipient will immediately vest in (i) the Restricted Stock Units scheduled to vest on the 2nd anniversary of the Grant Date and (ii) 6/12 (or 1⁄2) of the Restricted Stock Units scheduled to vest on the 3rd anniversary of the Grant Date.  The Recipient’s “Early Retirement Date” is the date of his or her voluntary termination of employment after attaining a combination of years of age and service with the Company and its Affiliates of at least 70, with a minimum age of 60; provided, that, notwithstanding any language to the contrary in the Plan, the Recipient’s years of service with a company prior to it becoming an Affiliate will qualify as service towards attainment of an Early Retirement Date if and only if the Recipient has provided at least five years of service with the Company or another company that was an Affiliate at the time of service.
(c)     If, from the Grant Date until the third anniversary of the Grant Date, the Recipient experiences a termination of employment with the Company and its Affiliates for any reason other those set forth in Section 5(a) and 5(b) above or Section 6 below, then the Recipient shall forfeit any unvested Restricted Stock Units outstanding as of the date of such termination of employment.
6.    Vesting upon Change in Control.  Upon a Change in Control occurring from the Grant Date until the third anniversary of the Grant Date and prior to the Recipient’s termination of employment with the Company and its Affiliates, all unvested Restricted Stock Units may be assumed or replaced by the Company or its successor with a substantially similar equity or cash incentive award and the same vesting terms as the unvested Restricted Stock Units.  If such unvested Restricted Stock Units are assumed or replaced in a Change in Control and the Recipient’s employment with the Company or its successor is terminated without Cause or by the Recipient 

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for Good Reason (as defined in the Recipient’s employment agreement with the Company, to the extent applicable) prior to the third anniversary of the Grant Date, the assumed or replaced award shall become fully vested on the date of such termination of employment and shall be paid to Recipient as soon as administratively feasible thereafter (but in no event later than March 15 of the year following the year in which the such termination of employment occurs).  To the extent any unvested Restricted Stock Units are not assumed or replaced by the Company or its successor upon a Change in Control as set forth above, then such unvested Restricted Stock Units shall immediately become vested on the date of such Change in Control and shall be paid to the Recipient as soon as administratively feasible thereafter (but in no event later than March 15 of the year following the year in which such Change in Control occurs).
7.    Adjustment in Capitalization.  In the event of any change in the Common Stock through stock dividends or stock splits, a corporate split-off or split-up, or recapitalization, merger, consolidation, exchange of shares, or a similar event, the number of Restricted Stock Units subject to this Agreement shall be equitably adjusted by the Committee.
8.    Delivery of Stock Certificates.  Subject to the requirements of Sections 9 and 10 below, the Company may, if applicable, cause to be issued and delivered to a brokerage account for the benefit of the Recipient certificates or electronic book entry credit for the shares of Common Stock that correspond to the vested Restricted Stock Units.
9.    Tax Withholding.  Whenever Common Stock is to be issued, a payment is to be made, or any other vesting or payment event occurs under this Agreement, the Company or any Subsidiary shall withhold, or, with the consent of the Committee, require the Recipient to remit to the Company or such Subsidiary, an amount sufficient to satisfy the federal, state, and local withholding tax requirements relating to such transaction, and the Company or such Subsidiary may defer any payment or issuance of Common Stock until such requirements are satisfied; provided that the amount of any such withholding shall not exceed the maximum statutory withholding rate applicable with respect to the Recipient.
10.    Securities Laws.  This Award is a private offer that may be accepted only by a Recipient who satisfies the eligibility requirements outlined in the Plan and the Committee’s administrative procedures.  The future value of Common Stock acquired under the Plan is unknown and could increase or decrease.
Neither the Plan nor any offering materials related to the Plan may be distributed to the public.  The Common Stock should be resold only on the New York Stock Exchange and should not be resold to the public except in full compliance with local securities laws.

11.    No Guarantee of Employment.  Nothing in this Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the Recipient’s employment at any time, or confer upon the Recipient any right to continue in the employ of the Company or any Subsidiary.  
12.    Compliance with Code Section 409A.  Notwithstanding any provision of the Plan or this Agreement to the contrary, the Award is intended to be exempt from or, in the alternative, 

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comply with Code Section 409A and the interpretive guidance thereunder, including the exceptions for stock rights and short-term deferrals.  The Plan and the Agreement will be construed and interpreted in accordance with such intent.  References in the Plan and this Agreement to “termination of employment” and similar terms shall mean a “separation from service” within the meaning of that term under Code Section 409A.  Any payment or distribution that is to be made to a Recipient who is a “specified employee” of the Company within the meaning of that term under Code Section 409A and as determined by the Committee, on account of a “separation from service” under Code Section 409A, may not be made before the date which is six months after the date of such “separation from service,” unless the payment or distribution is exempt from the application of Code Section 409A by reason of the short-term deferral exemption or otherwise.
13.    Dividend Equivalents. If the Company declares a cash dividend on its shares, then, on the payment date of the dividend, the Recipient will be credited with dividend equivalents equal to the amount of cash dividend per share multiplied by the number of Restricted Stock Units credited to the Recipient through the record date.  The dollar amount credited to the Recipient under the preceding sentence will be credited to an account (“Dividend Account”) established for the Recipient for bookkeeping purposes only on the books of the Company.  The amounts credited to the Dividend Account will be credited as of the last day of each month with interest, compounded monthly, until the amount credited to the Dividend Account is paid to the Recipient.  The rate of interest credited under the previous sentence will be the prime rate of interest as reported by the Midwest edition of the Wall Street Journal for the second business day of each quarter on an annual basis.  The balance in the Dividend Account will be subject to the same terms regarding vesting and forfeiture as the Recipient’s Restricted Stock Units awarded under the accompanying letter and this document, and will be paid in cash in a single sum at the time that the shares of Common Stock associated with the Recipient’s Restricted Stock Units are delivered (or forfeited at the time that the Recipient’s Restricted Stock Units are forfeited).
14.    No Fractional Shares.  No fractional shares of Common Stock shall be issued or delivered under this Agreement.  The Committee shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares of Common Stock or whether such fractional shares of Common Stock or any rights thereto shall be forfeited or otherwise eliminated.
15.    Amendment.  The Committee may at any time amend, modify or terminate this Agreement; provided, however, that no such action of the Committee shall adversely affect the Recipient’s rights under this Agreement without the consent of the Recipient.  The Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this Agreement so that the Award qualifies for exemption from or complies with Code Section 409A; provided, however, that the Committee and the Company make no representations that the Award shall be exempt from or comply with Code Section 409A and make no undertaking to preclude Code Section 409A from applying to the Award.
16.    Plan Terms and Committee Authority.  This Agreement and the rights of the Recipient hereunder are subject to all of the terms and conditions of the Plan, as it may be amended from time to time, as well as to such policies, rules and regulations as the Committee may adopt for administration of the Plan, including but not limited to any stock ownership and stock holding guidelines.  It is expressly understood that the Committee is authorized to administer, construe and 

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make all determinations necessary or appropriate for the administration of the Plan and this Agreement, all of which shall be binding upon the Recipient.  Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan.  The Recipient hereby acknowledges receipt of a copy of the Plan and this Agreement.
17.    Severability.  If any provision of this Agreement is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or the Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Board’s determination, materially altering the intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or person, and the remainder of the Agreement shall remain in full force and effect.
18.    Governing Law and Jurisdiction.  The Plan and this Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, United States of America.  The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), the Plan will be exclusively in the courts in the State of Indiana, County of Hamilton, United States of America, including the Federal Courts located therein (should Federal jurisdiction exist).
19.    Successors.  All obligations of the Company under this Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business or assets of the Company or both, or a merger, consolidation or otherwise.
20.    Erroneously Awarded Compensation.  This Award shall be subject to any compensation recovery policy adopted by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governances practices, as such policy may be amended from time to time.
[signature page follows]

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IN WITNESS WHEREOF, the Recipient and the Company have executed this Agreement as of this ___ day of [________], 2018.

	
		
	_______________________________
	KAR AUCTION SERVICES, INC.

By:_______________________________

	[NAME]
	Its:_______________________________

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