Document:

orcciii-ex42_8.htm

Exhibit 4.2

DESCRIPTION OF OUR SECURITIES

A. Common Stock, par value $0.01 per share.

As of December 31, 2020, the authorized capital stock of Owl Rock Capital Corporation III (the “Company,” “we,” “our” or “us”) consists solely of 500 million shares of common stock, par value $0.01 per share, and no shares of preferred stock, par value $0.01 per share. As permitted by the Maryland General Corporation Law (the “MGCL”), the charter of the Company (the “Charter”) provides that a majority of the entire board of directors (the “Board”), without any action by the Company’s shareholders, may amend the Charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Company has authority to issue. The Charter also provides that the Board may classify or reclassify any unissued shares of common stock into one or more classes or series of common stock or preferred stock by setting or changing the preferences, conversion or other rights, voting powers, restrictions, or limitations as to dividends, qualifications, or terms or conditions of redemption of the shares. There is currently no market for the Company’s stock, and the Company can offer no assurances that a market for its stock will develop in the future. The Company does not currently intend for the shares to be listed on any national securities exchange, although it is possible that they would be listed in the future.

There are no outstanding options or warrants to purchase the Company’s stock. No stock has been authorized for issuance under any equity compensation plans. Under Maryland law, the Company’s shareholders generally are not personally liable for the debts of the Company, except as they may be liable by reason of their own conduct or acts. Unless the Board determines otherwise, the Company will issue all shares of its stock in uncertificated form.

None of the Company’s shares of common stock are subject to further calls or to assessments, sinking fund provisions, obligations of the Company or potential liabilities associated with ownership of the security (not including investment risks).

Under the terms of the Charter, all shares of common stock have equal rights as to dividends, distributions and voting and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable. Dividends and distributions may be paid to shareholders if, as and when authorized by the Board and declared by the Company out of funds legally available therefor. Shares of common stock have no preemptive, exchange, conversion or redemption rights and shareholders generally have no appraisal rights. Shares of common stock are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract (including the subscription agreement) and except that, in order to avoid the possibility that the Company’s assets could be treated as “plan assets,” the Company may require any person proposing to acquire shares of common stock to furnish such information as may be necessary to determine whether such person is a Benefit Plan Investor , as such term is defined in section 3(42) of the Employee Retirement Income Security Act of 1974, as amended, or a controlling person, restrict or prohibit transfers of shares of such stock or redeem any outstanding shares of stock for such price and on such other terms and conditions as may be determined by or at the direction of the Board.

Under the terms of the Charter, during the Lock-Up Period (as defined below), shareholders will be restricted from: (1) offering, pledging, selling, contracting to sell, sell any option or contract to purchase, purchasing any option or contract to sell, granting any option, right or warrant to purchase or otherwise transferring or disposing of, directly or indirectly, any shares of common stock or securities convertible into or exchangeable or exercisable for any shares of common stock, or publicly disclosing the intention to make any offer, sale, pledge or disposition, (2) entering into any 

 

 

swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of common stock or such other securities, in cash or otherwise), or (3) if applicable, making any demand for or exercise any right with respect to the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock. The Lock-Up Period is (i) 365 days after the date of a future quotation or listing of the Company’s securities on a national securities exchange (an “Exchange Listing”) for all shares of common stock held by certain individuals and entities affiliated with Owl Rock Diversified Advisors LLC (the “Adviser”), and (ii) 180 days after the date of an Exchange Listing for all shares of common stock held by a shareholder (other than certain individuals and entities affiliated with the Adviser), 270 days after the date of an Exchange Listing for two-thirds of the shares of common stock held by a shareholder (other than certain individuals and entities affiliated with the Adviser) and 365 days after the date of an Exchange Listing for one-third of the shares of common stock held by a shareholder (other than certain individuals and entities affiliated with the Adviser). The lock-up will apply to all shares of common stock acquired prior to an Exchange Listing but will not apply to any shares acquired in open market transactions or acquired pursuant to the dividend reinvestment plan after the date of an Exchange Listing

In the event of the Company’s liquidation, dissolution or winding up, each share of common stock would be entitled to share ratably in all of the Company’s assets that are legally available for distribution after the Company pays or otherwise provide for all debts and other liabilities and subject to any preferential rights of holders of the Company’s preferred stock, if any preferred stock is outstanding at such time. Subject to the rights of holders of any other class or series of stock, each share of common stock is entitled to one vote on all matters submitted to a vote of shareholders, including the election of directors, and the shareholders will possess the exclusive voting power. There will be no cumulative voting in the election of directors. Cumulative voting entitles a shareholder to as many votes as equals the number of votes which such holder would be entitled to cast for the election of directors multiplied by the number of directors to be elected and allows a shareholder to cast a portion or all of the shareholder’s votes for one or more candidates for seats on the Board. Without cumulative voting, a minority shareholder may not be able to elect as many directors as the shareholder would be able to elect if cumulative voting were permitted. Subject to the special rights of the holders of any class or series of preferred stock to elect directors, each director will be elected by a majority of the votes cast with respect to such director’s election, except in the case of a “contested election” (as defined in the Company’s bylaws (“Bylaws”)), in which directors will be elected by a plurality of the votes cast in the contested election of directors.

Limitation on Liability of Directors; Indemnification and Advance of Expenses

Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the corporation and its shareholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. The Charter contains a provision that eliminates directors’ and officers’ liability, subject to the limitations of Maryland law and the requirements of the Investment Company Act of 1940, as amended (the “1940 Act”).

Maryland law requires a corporation (unless its charter provides otherwise, which the Charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity against reasonable expenses actually incurred in the proceeding in which the director or 

 

officer was successful. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that (1) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty; (2) the director or officer actually received an improper personal benefit in money, property or services; or (3) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. Under Maryland law, a Maryland corporation also may not indemnify for an adverse judgment in a suit by or on behalf of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received, unless in either case a court orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

The Charter obligates the Company, subject to the limitations of Maryland law and the requirements of the 1940 Act, to indemnify (1) any present or former director or officer; or (2) any individual who, while a director or officer and at the Company’s request, serves or has served another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner, member, manager or trustee, from and against any claim or liability to which the person or entity may become subject or may incur by reason of such person’s service in that capacity, and to pay or reimburse such person’s reasonable expenses as incurred in advance of final disposition of a proceeding. In accordance with the 1940 Act, the Company will not indemnify any person for any liability to the extent that such person would be subject by reason of such person’s willful misconduct, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his, her or its office.

Maryland Law and Certain Charter and Bylaw Provisions; Anti-Takeover Measures

Maryland law contains, and the Charter and the Bylaws also contain, provisions that could make it more difficult for a potential acquirer to acquire the Company by means of a tender offer, proxy contest or otherwise. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of the Company to negotiate first with the Board. These measures may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of shareholders. The Company believes, however, that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the Board of Director’s ability to negotiate such proposals may improve their terms.

Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, consolidate, convert into another form of business entity, sell all or substantially all of its assets or engage in a statutory share exchange unless declared advisable by the corporation’s board of directors and approved by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. A Maryland corporation may provide in its charter for approval of these matters by a lesser or greater percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Subject to certain exceptions discussed below, the Charter provides for approval of these actions by the affirmative vote of shareholders entitled to cast a 

 

majority of the votes entitled to be cast on the matter.

 Subject to certain exceptions provided in the Charter, the affirmative vote of at least 75% of the votes entitled to be cast thereon, with the holders of each class or series of the Company’s stock voting as a separate class will be necessary to effect any of the following actions:

	
 
	
•
	
any amendment to the Charter to make the common stock a “redeemable security” or to convert the Company from a “closed-end company” to an “open-end company” (as such terms are defined in the 1940 Act);

	
 
	
•
	
the liquidation or dissolution of the Company and any amendment to the Charter to effect and such liquidation or dissolution;

	
 
	
•
	
any merger, consolidation, conversion, share exchange or sale or exchange of all or substantially all of our assets that the MGCL requires be approved by shareholders; or

	
 
	
•
	
any transaction between the Company, on the one hand, and any person or group of persons acting together that is entitled to exercise or direct the exercise, or acquire the right to exercise or direct the exercise, directly or indirectly (other than solely by virtue of a revocable proxy), of one-tenth or more of the voting power in the election of our directors generally, or any person controlling, controlled by or under common control with, employed by or acting as an agent of, any such person or member of such group.

However, if the proposal, transaction or business combination is approved by at least a majority of the Company’s continuing directors, the proposal, transaction or business combination may be approved only by the Board and, if necessary, the shareholders as otherwise would be required by applicable law, the Charter and Bylaws, without regard to the supermajority approval requirements discussed above. A “continuing director” is defined in the Charter as (1) our current directors, (2) those directors whose nomination for election by the shareholders or whose election by the directors to fill vacancies is approved by a majority of our current directors then on the Board or (3) any successor directors whose nomination for election by the shareholders or whose election by the directors to fill vacancies is approved by a majority of continuing directors or the successor continuing directors then in office.

The Charter also provides that the Board is divided into three classes, as nearly equal in size as practicable, with each class of directors serving for a staggered three-year term. Additionally, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, directors may be removed at any time, but only for cause (as such term is defined in the Charter) and only by the affirmative vote of shareholders entitled to cast at least 75% of the votes entitled to be cast generally in the election of directors, voting as a single class. The Charter and Bylaws also provide that, except as provided otherwise by applicable law, including the 1940 Act and subject to any rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, any vacancy on the Board, and any newly created directorship resulting from an increase in the size of the Board, may only be filled by vote of the directors then in office, even if less than a quorum, or by a sole remaining director; provided that, under Maryland law, when the holders of any class, classes or series of stock have the exclusive power under the Charter to elect certain directors, vacancies in directorships elected by such class, classes or series may be filled by a majority of the remaining directors so elected by such class, classes or series of the Company’s stock. In addition, the Charter provides that, subject to any rights of holders of one or more classes or series of stock to elect or remove one or more directors, the total number of directors will be fixed from time to time exclusively pursuant to resolutions adopted by the Board.

The classification of the Board and the limitations on removal of directors described above as 

 

well as the limitations on shareholders’ right to fill vacancies and newly created directorships and to fix the size of the Board could have the effect of making it more difficult for a third party to acquire the Company, or of discouraging a third party from acquiring or attempting to acquire the Company.

Maryland law and the Charter and the Company’s Bylaws also provide that:

	
 
	
•
	
any action required or permitted to be taken by the shareholders at an annual meeting or special meeting of shareholders may only be taken if it is properly brought before such meeting or by unanimous consent in lieu of a meeting;

	
 
	
•
	
special meetings of the shareholders may only be called by the Board, the chairman of the Board or the chief executive officer, and must be called by the secretary upon the written request of shareholders who are entitled to cast at least a majority of all the votes entitled to be cast on such matter at such meeting; and

	
 
	
•
	
from and after the first closing of a private offering, any shareholder nomination or business proposal to be properly brought before a meeting of shareholders must have been made in compliance with certain advance notice and informational requirements.

These provisions could delay or hinder shareholder actions which are favored by the holders of a majority of the Company’s outstanding voting securities. These provisions may also discourage another person or entity from making a tender offer for the common stock, because such person or entity, even if it acquired a majority of the Company’s outstanding voting securities, would be able to take action as a shareholder (such as electing new directors or approving a merger) only at a duly called shareholders meeting, and not by written consent. The provisions of the Charter requiring that the directors may be removed only for cause and only by the affirmative vote of at least three-quarters of the votes entitled to be cast generally in the election of directors will also prevent shareholders from removing incumbent directors except for cause and upon a substantial affirmative vote. In addition, although the advance notice and information requirements in the Bylaws do not give the Board any power to disapprove shareholder nominations for the election of directors or business proposals that are made in compliance with applicable advance notice procedures, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to the Company and the shareholders.

Under the MGCL, a Maryland corporation generally cannot amend its charter unless the amendment is declared advisable by the corporation’s board of directors and approved by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. A Maryland corporation may provide in its charter for approval of these matters by a lesser or greater percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Subject to certain exceptions discussed below, the Charter provides for approval of charter amendments by the affirmative vote of shareholders entitled to cast a majority of the votes entitled to be cast on the matter. The board of directors, by vote of a majority of the members of the Board, has the exclusive power to adopt, alter, amend or repeal the Bylaws. The Charter provides that any amendment to the following provisions of the Charter, among others, will require, in addition to any other vote required by applicable law or the Charter, the affirmative vote of shareholders entitled to cast at least 75% of the votes entitled to be cast generally in the election of directors, with the holders of each class or series of the Company’s stock voting as a separate class, unless a majority of the continuing directors approve the amendment, in which case such amendment must be approved 

 

as would otherwise be required by applicable law, the Charter and/or the Bylaws:

	
 
	
•
	
the provisions regarding the classification of the Board;

	
 
	
•
	
the provisions governing the removal of directors;

	
 
	
•
	
the provisions limiting shareholder action by written consent;

	
 
	
•
	
the provisions regarding the number of directors on the Board; and

	
 
	
•
	
the provisions specifying the vote required to approve extraordinary actions and amend the Charter and the Board’ exclusive power to amend the Bylaws.

Advance Notice Provisions for Shareholder Nominations and Shareholder Proposals

The Bylaws provide that, with respect to an annual meeting of shareholders, nominations of individuals for election as directors and the proposal of business to be considered by shareholders may be made only (a) pursuant to the Company’s notice of the meeting, (b) by or at the direction of the Board or (c) by a shareholder who is a shareholder of record both at the time of giving the advance notice required by the Bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the advance notice procedures of the Bylaws. With respect to special meetings of shareholders, only the business specified in the Company’s notice of the meeting may be brought before the meeting. Nominations of individuals for election as directors at a special meeting at which directors are to be elected may be made only (a) by or at the direction of the Board or (b) provided that the special meeting has been called in accordance with the Bylaws for the purpose of electing directors, by a shareholder who is a shareholder of record both at the time of giving the advance notice required by the Bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the advance notice provisions of the Bylaws.

The purpose of requiring shareholders to give the Company advance notice of nominations and other business is to afford the Board a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by the Board, to inform shareholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of shareholders. Although the Bylaws do not give the Board any power to disapprove shareholder nominations for the election of directors or proposals recommending certain action, the advance notice and information requirements may have the effect of precluding election contests or the consideration of shareholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to the Company and its shareholders.

No Appraisal Rights

For certain extraordinary transactions and charter amendments, the MGCL provides the right to dissenting shareholders to demand and receive the fair value of their shares, subject to certain procedures and requirements set forth in the statute. Those rights are commonly referred to as appraisal rights. As permitted by the MGCL, the Charter provides that shareholders will not be entitled to exercise appraisal rights unless the Board determines that appraisal rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which shareholders would otherwise be entitled to exercise appraisal rights.

 

Control Share Acquisitions

Certain provisions of the MGCL provide that a holder of control shares of a Maryland corporation acquired in a control share acquisition has no voting rights with respect to the control shares except to the extent approved by the affirmative vote of two-thirds of the votes entitled to be cast on the matter, which is referred to as the Control Share Acquisition Act (the “Controlled Share Acquisition Act”). Shares owned by the acquiror, by officers or by employees who are directors of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:

	
 
	
•
	
one-tenth or more but less than one-third;

	
 
	
•
	
one-third or more but less than a majority; or

	
 
	
•
	
a majority or more of all voting power.

The requisite shareholder approval must be obtained each time an acquirer crosses one of the thresholds of voting power set forth above. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval or shares acquired directly from the corporation. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition may compel the Board of the corporation to call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any shareholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or if a meeting of shareholders is held at which the voting rights of the shares are considered and not approved, as of the date of such meeting. If voting rights for control shares are approved at a shareholder meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote,  all other shareholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The Control Share Acquisition Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Control Share Acquisition Act any and all acquisitions by any person of shares of stock. The U.S. Securities and Exchange Commission (the “SEC”) staff previously took the position that, if a business development company (“BDC”) failed to opt-out of the Control Share Acquisition Act, its actions would be inconsistent with Section 18(i) of the 1940 Act. However, the 

 

SEC recently withdrew its previous position, and stated that is would not recommend enforcement action against a closed-end fund, including a BDC, that that opts in to being subject to the Control Share Acquisition Act if the closed-end fund acts with reasonable care on a basis consistent with other applicable duties and laws and the duty to the company and its shareholders generally. As such, we may amend our bylaws to be subject to the Control Share Acquisition Act, but will do so only if the Board determines that it would be in our best interests and if such amendment can be accomplished in compliance with applicable laws, regulations and SEC guidance.

Business Combinations

Under Maryland law, “business combinations” between a Maryland corporation and an interested shareholder or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, statutory share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested shareholder is defined as:

	
 
	
•
	
any person who beneficially owns 10% or more of the voting power of the corporation’s stock; or

	
 
	
•
	
an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.

A person is not an interested shareholder under this statute if the corporation’s board of directors approves in advance the transaction by which he or she otherwise would have become an interested shareholder. However, in approving a transaction, the board may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any such business combination generally must be recommended by the corporation’s board of directors and approved by the affirmative vote of at least:

	
 
	
•
	
80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

	
 
	
•
	
two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested shareholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested shareholder.

These super-majority vote requirements do not apply if holders of the corporation’s common stock receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested shareholder for its shares. The statute provides various exemptions from its provisions, including for business combinations that are exempted by the corporation’s board of directors before the time that the interested shareholder becomes an interested shareholder. The board of directors has adopted a resolution exempting from the requirements of the statute any business combination between the Company and any other person, provided that such business combination is first approved by the Board (including a majority of the directors who are not “interested persons” within the meaning of the 1940 Act). This resolution, however, may be altered or repealed in whole or in part at any time. If this resolution is repealed, or the Board does not otherwise approve a business combination, the 

 

statute may discourage others from trying to acquire control of the Company and increase the difficulty of consummating any offer.

Conflict with the 1940 Act

The Bylaws provide that, if and to the extent that any provision of the MGCL, including the Control Share Acquisition Act (if the Company amends its Bylaws to be subject to such Act) and the Business Combination Act or any provision of the Charter or the Bylaws conflicts with any provision of the 1940 Act, the applicable provision of the 1940 Act will control.

 

Exclusive Forum

Our Bylaws require that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City (or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company (ii) any action asserting a claim of breach of any standard of conduct or legal duty owed by any of the Company’s director, officer or other agent to the Company or to its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the MGCL or the Charter or the Bylaws (as either may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine. This exclusive forum selection provision in our Bylaws does not apply to claims arising under the federal securities laws, including the Securities Act and the Exchange Act.

There is uncertainty as to whether a court would enforce such a provision, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. In addition, this provision may increase costs for stockholders in bringing a claim against us or our directors, officers or other agents. Any investor purchasing or otherwise acquiring our shares is deemed to have notice of and consented to the foregoing provision.

The exclusive forum selection provision in our Bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other agents, which may discourage lawsuits against us and such persons. It is also possible that, notwithstanding such exclusive forum selection provision, a court could rule that such provision is inapplicable or unenforceable.Document

Exhibit 10.1

EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”), dated March 1, 2021 and effective April 1, 2021 (the “Effective Date”), is entered into by and between KAR Auction Services, Inc. (“Employer”) and James P. Hallett (“Employee”).
RECITALS
A.    Employer desires to continue to employ Employee, and Employee desires to accept such continued employment, on the terms and conditions set forth in this Agreement.
B.     This Agreement shall govern the employment relationship between Employee and Employer from and after the Effective Date, and, as of the Effective Date, supersedes and negates all previous agreements and understandings with respect to such relationship (including, without limitation, the Employment Agreement by and between Employer and Employee dated February 27, 2012 (the “Prior Employment Agreement”)).
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 March 31, 2023, unless terminated earlier pursuant to Section 4 of this Agreement (the “Employment Period”).
2.     Title and Duties.  During the Employment Period, Employee shall serve as the Executive Chairman 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 the 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. Employee shall continue to serve as a member of the Board through his current term and will be nominated to serve as a member of the Board throughout the Employment Period.
3.     Compensation and Benefits.
(a)    Base Salary.  During the Employment Period, Employee shall be paid an annual base salary of $725,000 (“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, except that Employee shall be entitled to a Pro Rata Bonus (as defined in Section 4(e)) for calendar year 2023.  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.      In 2021 and 2022, 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 (the “2009 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 Twenty Five Thousand Dollars ($25,000).  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 
2

monthly. Employee shall be entitled to a pro-rated portion of such annual automobile allowance for calendar year 2023.
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 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 or such earlier date as is required by applicable law; (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 or such earlier date as is required by applicable law; 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, (D) Employee’s material breach of Employer’s Code of Business Conduct and Ethics, as amended by Employer from time to time, or (E) 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:
3

(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
(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 2009 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.
For the avoidance of doubt, Employee agrees that the authority, duties, or responsibilities and the compensation contemplated by this Agreement, do not constitute “Good Reason” under the Prior Employment Agreement as that term is defined in Paragraph 4(d) of the Prior Employment Agreement, and any termination hereunder shall be determined by reference to the authorities, duties, responsibilities and compensation set forth herein.
(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) Employer shall provide Employee with the Continued Benefits (as defined below), (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 
4

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 (the “Pro Rata Bonus”) 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”).
For purposes of this Agreement,  “Continued Benefits” means continued coverage for Employee (and Employee’s qualified beneficiaries’), at no cost to Employee, under any medical plan or policy in which Employee was participating as of the time of Employee’s termination of employment (as may be amended by Employer from time to time in the ordinary course), to the extent that Employee timely elects such continued coverage, until the earlier of: (A) eighteen (18) months following the date of termination and (B) the date Employee is or becomes eligible for comparable coverage under health plans of another employer, which period shall run concurrently with the continuation period required to be provided under the Consolidated Omnibus Budget Reconciliation Act; provided, however, to the extent that Employer determines that such the provision of the Continued Benefits would result in adverse tax consequences to Employer, Employer may instead, in its discretion, provide substantially similar benefits or payment outside of Employer’s benefit plans if Employer reasonably determines that providing such alternative benefits or payment is appropriate to minimize such potential adverse tax consequences and penalties.
(f)    Resignation as Officer or Director. Upon a termination of Employee’s employment hereunder for any reason, unless requested otherwise by Employer, Employee shall resign each position (if any) that Employee then holds as an officer or director of Employer or any of its Affiliates. For purposes of this Agreement, “Affiliate” means an Affiliate of Employer within the meaning of Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended. For purposes of clarity, Employee shall tender his resignation from the Board following the Employment Period, and the Board may determine whether to accept such proposed resignation or request that Employee continue to serve on the Board in its sole discretion.
5.     Severance Benefits.  
(a)    Qualifying Termination. In the event of a termination of Employee’s employment under Section 4(b) or 4(c) of this Agreement that is not a COC Qualifying Termination (as defined below), Employer shall provide Employee with the following severance benefits:
(i)    Employer shall pay to Employee an amount equal to two and one-half (2.5) times the sum of (x) Employee’s then current annual Base Salary and 
5

(y) Employee’s annual bonus at target under the Bonus Plan 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.
(ii)    The Continued Benefits;
(iii)    The Pro Rata Bonus; and
(iv)    The Earned But Unpaid Bonus.
(b)    COC Qualifying Termination. In the event of a termination of Employee’s employment under Section 4(b) or 4(c) of this Agreement that occurs within two (2) years following a Change of Control (a “COC Qualifying Termination”), Employer shall provide Employee with the following severance benefits:
(i)    Employer shall pay to Employee an amount equal to two and one-half (2.5) times the sum of (x) Employee’s then current annual Base Salary and (y) Employee’s annual bonus at target under the Bonus Plan 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.
(ii)    The Continued Benefits;
(iii)    The Pro Rata Bonus; and
(iv)    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-five (55) days following the termination of Employee’s employment a release and separation agreement, 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 vehicle remarketing industry and other applicable industries.  Employee understands and 
6

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 (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 or its Affiliates, 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, inventions, ideas, innovations, developments, methods, processes, systems and technologies, (B) business and technical information that gives Employer or its Affiliates a competitive advantage, and (C) information concerning Employer’s or any of its Affiliates’ customers, suppliers, vendors, licensors, affiliates, financing sources, profits, revenues, financial condition, pricing, training programs, service techniques, service processes, business processes, marketing plans, and business strategies.
(c)    Defend Trade Secrets Act.  Pursuant to 18 U.S.C. § 1833(b), Employee will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of Employer that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to Employee’s attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.  If Employee files a lawsuit for retaliation by Employer for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee (i) files any document containing the trade secret under seal, and (ii) does not disclose the trade secret, except pursuant to court order.  Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section.  Further, nothing in any agreement Employee has with Employer shall prohibit or restrict Employee from making any voluntary disclosure of information or documents to any governmental agency or 
7

legislative body, or any self-regulatory organization, in each case, without advance notice to Employer.  Nothing in this Agreement shall prohibit or restrict Employee from (i) making any disclosure of information required by law or (ii) providing information to, testifying or otherwise assisting in any investigation or proceeding brought by any Federal or State regulatory or law enforcement agency or legislative body, or any self-regulatory organization.
(d)    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), innovation, technical information and copyrightable work, in which Employee participates during Employee’s employment with Employer whether or not during working hours, that pertains to Employer’s or any of its Affiliates’ business or is aided by the use of time, material, or facilities of Employer or its Affiliates.  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.
(e)    Non-Competition.  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, directly or indirectly, on his or her behalf or on behalf of any other person or entity, provide any labor, work, services, assistance or advice for or on behalf of any Competitor (as defined below), in any geographic market in which Employer or any of its Affiliates conduct business (the “Territory”). In addition, Employee shall not, 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, directly or indirectly, either alone or in conjunction with any other person, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of any Competitor within the Territory.  Nothing herein shall prohibit Employee from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that Employee is not a controlling person of, or a member of a group that controls, such corporation.  For purposes of this Agreement, “Competitor” means any person or entity engaged in the business of wholesale, retail or consumer vehicle remarketing activities, including but not limited to vehicle auctions (including physical, electronic, mobile app and/or digital auctions), dealer floor plan financing and other products, services and technologies relating to vehicle remarketing within the Territory, provided that Employer or any of its Affiliates is engaged in such businesses.
(f)    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 or any of its Affiliates to leave the employ of Employer or its Affiliates, or in any way interfere with the relationship between Employer and its Affiliates and any of their respective employees, or (ii) induce or attempt to induce any customer, client, member, supplier, licensee, licensor or other 
8

business relation of Employer or its Affiliates to cease doing business with Employer or its Affiliates, or otherwise interfere with the business relationship between Employer or its Affiliates and any such customer, client, member, supplier, licensee, licensor or business relation.
(g)    Cooperation. Employee agrees that at all times following the termination of Employee’s employment for any reason, Employee will cooperate in all reasonable respects (after taking into account Employee’s personal and professional schedule) with Employer and in connection with any and all existing or future litigation, actions or proceedings arising with respect to the period of Employee’s employment with Employer (whether civil, criminal, administrative, regulatory or otherwise) brought by or against Employer, to the extent Employer reasonably deems Employee’s cooperation necessary, provided that Employer shall use reasonable efforts to limit Employee’s need to travel in connection with providing such cooperation. Employee shall be reimbursed for all reasonable out-of-pocket expenses incurred by Employee as a result of such cooperation. With respect to any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory or otherwise) brought against Employee in connection with Employee’s employment by Employer, Employer will honor, and proceed in accordance with, its bylaws as in effect from time to time and any indemnification agreement, plan or policy in effect and applicable to Employee as of the date of Employee’s termination of employment with 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 payment.  Without limiting the foregoing, solely to the extent required to avoid the imposition of any additional tax or interest to 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 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 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 Employee’s employment for any reason, subject to earlier immediate payment if 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 
9

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.    Section 280G. 
(a)    Notwithstanding anything in this Agreement to the contrary, in the event that any payment or benefit received or to be received by Employee (including any payment or benefit received in connection with a Change of Control or the termination of Employee’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits being hereinafter referred to as the “Total Payments”) would not be deductible (in whole or part) by Employer or any of its Affiliates making such payment or providing such benefit as a result of Section 280G of the Code (“Section 280G”), then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payments provided by reason of Section 280G in such other plan, arrangement or agreement), the Total Payments shall be reduced (if necessary, to zero) in the manner specified in Section 9(b) hereof; provided, however, that such reduction shall only be made if (i) the amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (ii) the amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of the excise tax imposed under Section 4999 of the Code (the “Excise Tax”) on such unreduced Total Payments).
(b)    If it is determined that the Total Payments should be reduced in accordance with the Section 9(a) hereof, then such reduction shall be applied in the following order: (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced next (if necessary, to zero), with amounts that are payable or deliverable last reduced first; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); (iv) payments due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); and (v) all other non-cash benefits not otherwise described in clauses (ii) or (iv) of this Section 9(b) will be next reduced pro-rata.
(c)    It is possible that, after the determinations and selections made pursuant to Section 9(a) hereof, Employee will receive Total Payments that are, in the aggregate, either more or less than the amount determined under Section 9(a) hereof (hereafter 
10

referred to as an “Excess Payment” or “Underpayment”, as applicable). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then Employee shall, except to the extent that it would cause a violation of the Sarbanes-Oxley Act of 2002, promptly repay the Excess Payment to Employer, together with interest on the Excess Payment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of Employee’s receipt of such Excess Payment until the date of such repayment. In the event that it is determined (i) by arbitration pursuant to Section 10 hereof, (ii) by a court or (iii) by the accounting firm which was, immediately prior to a Change of Control, Employer’s independent auditor, upon request of either party, that an Underpayment has occurred, Employer shall promptly pay an amount equal to the Underpayment to Employee (but in any event within ten (10) days of such determination), together with interest on such amount at the applicable federal rate from the date such amount would have been paid to Employee had the provisions of Section 9(a) hereof not been applied until the date of payment.
10.     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.
11.    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 by hand or by email or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:
        To Employer:        KAR Auction Services, Inc.
                    11299 North Illinois Street
                    Carmel, IN  46032
                    Attention:  Chuck Coleman
                    Email:  chuck.coleman@karglobal.com
11

        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, without limitation, the Prior Employment Agreement).
(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 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.
(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]

12

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/ Eric M. Loughmiller
	 /s/ James P. Hallett
	Printed: Eric M. Loughmiller
	James P. Hallett
	Title: Executive Vice President and Chief Financial Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00322-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00322-of-00352.parquet"}]]