Document:

Exhibit 10.2

 

KAR Auction Services, Inc.

 

2009 OMNIBUS STOCK AND INCENTIVE PLAN

 

PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

2013 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 a target number of [              ] Restricted Stock Units (the “Award”) as of December 13, 2013 (the “Grant Date”), subject to the terms and conditions of the Plan and this Agreement.  The Restricted Stock Units shall vest based on the Company’s performance during the “Period of Restriction,” as specified in Section 4 and 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 termination of the Period of Restriction specified 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, nor shall the Recipient receive or be entitled to receive any dividends or dividend equivalents 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 provisions of the Plan and this Agreement, unless vested or forfeited earlier as described in Section 5, 6, or 7 of this Agreement, as applicable, the number of Restricted Stock Units that shall become vested shall be calculated in accordance with the chart below, based on the percentile rank of the Company’s “Total Shareholder Return” relative to the Total Shareholder Return of the “S&P 500 Companies” for the “Measurement Period,” calculated as of the “Measurement Date” (each as defined below).  If the Total Shareholder Return percentile rank falls between Threshold and Target or between Target and Maximum levels of performance, the number of Restricted Stock Units that vest shall

 

 

be calculated using straight-line interpolation.  Such vesting shall occur upon certification by the Committee that the applicable performance criteria have been met.

 

	
Total Shareholder Return Percentile Rank
   vs. S&P 500 During the Measurement
   Period
    	
 
    	
Number of Restricted Stock Units Vesting
    
	
Below Threshold: 
    	
 
    	
 
    
	
Below 40th percentile
    	
 
    	
0
    
	
Threshold: 
    	
 
    	
 
    
	
40th percentile
    	
 
    	
[0.5x]
    
	
Target: 
    	
 
    	
 
    
	
65th percentile
    	
 
    	
[x]
    
	
Maximum: 
    	
 
    	
 
    
	
Greater than or equal to   85th percentile
    	
 
    	
[2x]
    

 

x = [Target number of Restricted Stock Units]

 

“Total Shareholder Return” shall mean the percentage change in the Fair Market Value of a share of Common Stock (plus reinvested dividends and other distributions paid on the Common Stock and adjusted to offset any changes in capitalization affecting the value of a share of Common Stock, including stock dividends, stock splits, reverse stock splits and similar events that occur prior to the end of the Measurement Period) during the Measurement Period.  Twenty (20) trading day average closing values of the Common Stock and the stock of the S&P 500 Companies, as applicable (i.e., average closing values over the period of 20 trading days ending on the Grant Date and the final 20 trading days ending on the Measurement Date), shall be used to value the Common Stock and the stock of the S&P 500 Companies, as applicable, at the beginning and end of the Measurement Period.

 

“S&P 500 Companies” shall mean all companies in the S&P 500 Index as of the Grant Date which remain publicly traded throughout the entire Measurement Period.  Companies which were part of the S&P 500 Index as of the Grant Date but are no longer publicly traded as of the Measurement Date shall be excluded except that companies which were part of the S&P 500 Index as of the Grant Date but are not longer publicly traded due to filing for bankruptcy prior to the Measurement Date shall be assigned a Total Shareholder Return of -100% for the Measurement Period.

 

“Measurement Period” shall mean the period commencing on Grant Date and ending on the Measurement Date.

 

“Measurement Date” shall mean December 13, 2016 (or earlier in accordance with Section 7).

 

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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.

 

5.             Vesting upon Termination by the Company without Cause, by the Recipient for Good Reason or due to Retirement, Disability or Death.  If, from the Grant Date until the “Payment Date” (as defined in Section 9), the Recipient experiences a termination of employment by the Company without Cause, by the Recipient due to “Good Reason” (as defined in the Recipient’s employment agreement with the Company, to the extent applicable) or by reason of Retirement, Disability or death, then the Recipient shall be entitled to receive, on the Payment Date, a number of shares of Common Stock the Recipient would have been entitled to under Section 4 if he or she had remained employed until the last day of the Period of Restriction (based on actual performance during the Period of Restriction, as described in Section 4) multiplied by a fraction, the numerator of which shall be the number of full calendar months during the period of the Grant Date through the date the Recipient’s employment terminated and the denominator of which shall be 36, the total number of months in the Period of Restriction.

 

6.             Forfeiture upon Termination by the Company for Cause or upon Recipient’s Resignation Without Good Reason.  If, from the Grant Date until the “Payment Date” (as defined in Section 9), the Recipient experiences a termination of employment by the Company for Cause or by the Recipient other than for “Good Reason” (as defined in the Recipient’s employment agreement with the Company, to the extent applicable), then the Recipient shall forfeit any Restricted Stock Units that are subject to the Period of Restriction on the date of such termination of employment.

 

7.             Vesting upon Change in Control.  Upon a Change in Control occurring during the Measurement Period, the Measurement Date shall be the date of the consummation of such Change in Control.  The number of Restricted Stock Units earned during the Measurement Period, if any, shall become vested on December 13, 2016, subject to the Recipient’s continued employment with the Company or its successor through such date, and be paid in accordance with Section 9. Notwithstanding the foregoing, if the Recipient is terminated by the Company without Cause or the Recipient resigns due to “Good Reason” (as defined in the Recipient’s employment agreement with the Company, to the extent applicable) after the consummation of the Change in Control but before December 13, 2016, the number of Restricted Stock Units earned during the Measurement Period, if any, shall become immediately vested on the date of such termination of employment and be paid as soon as administratively feasible thereafter (but in no event later than March 15 of the year following the year in which such termination of employment occurs).

 

8.             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.

 

9.             Delivery of Stock Certificates.  Subject to the requirements of Sections 10 and 11 below, as promptly as practicable after the Committee certifies that Restricted Stock Units

 

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ceased to be subject to the Period of Restriction in accordance with this Agreement, but in no event later than March 15 of the year following the year in which the shares became vested (the “Payment Date”), 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.

 

10.          Tax Withholding.  Whenever Common Stock is to be issued or any payment is to be made under this Agreement, the Company or any Subsidiary shall have the power to withhold, or require the Recipient to remit to the Company or such Subsidiary, an amount sufficient to satisfy the statutory minimum 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.

 

11.          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.

 

12.          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.

 

13.          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, 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.

 

14.          Dividend Equivalents. The Recipient will accrue dividend equivalents with respect to the Award. Dividend equivalents represent the right to receive additional shares of Common Stock in the future, subject to the terms and conditions of this Agreement. Dividend equivalents will be determined based on the dividends that the Recipient would have received, had the Recipient held shares of Common Stock equal to the vested number of Restricted Stock Units from the Grant Date until the Payment Date, and assuming that the dividends were

 

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reinvested in Common Stock (and any dividends on such shares were reinvested in Common Stock). The dividend equivalents will be subject to the same transfer restrictions and forfeiture and vesting conditions as specified in this Agreement.

 

15.          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.

 

16.          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.

 

17.          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 rules and regulations as the Committee may adopt for administration of the Plan.  It is expressly understood that the Committee is authorized to administer, construe and 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.

 

18.          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.

 

19.          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).

 

20.          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.

 

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21.          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                   ,           .

 

 

	
 
    	
 
    	
KAR   AUCTION SERVICES, INC. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
[NAME]
    	
 
    	
Its:
    	
 
    

 

7Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”), dated and effective December 17, 2013 (“Effective Date”), is entered into by and between KAR Auction Services, Inc. (“Employer”) and Thomas Caruso (“Employee”).

 

RECITALS

 

A.                                    Employer desires to employ Employee as its Chief Client Officer pursuant to the terms and conditions set forth in this Agreement.

 

B.                                    Employee desires to accept such employment.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Employment Period.  The period of employment of Employee by Employer hereunder shall commence on the Effective Date and continue thereafter until terminated pursuant to Section 4 of this Agreement (the “Employment Period”).

 

2.                                      Title and Duties.  During the Employment Period, Employee shall serve as the Chief Client Officer of Employer and shall perform the duties and responsibilities inherent in such position and any other duties consistent with such position as may be reasonably assigned to Employee from time to time by Employer’s Chief Executive Officer or Board of Directors of Employer (“Board”).  Employee shall perform the duties of this position in a diligent and competent manner and on a full-time basis during the Employment Period.

 

3.                                      Compensation and Benefits.

 

(a)                                 Base Salary.  During the Employment Period, Employee shall be paid an annual base salary of $425,000 (“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.  Payment of any bonus pursuant to the Bonus Plan shall be made as soon as practicable but in no event later than March 15 of the year following the calendar year to which such bonus relates.

 

(d)                                 Equity.         Employee shall be eligible to participate in all Employer incentive programs extended to executive-level employees of Employer generally at levels commensurate with Employee’s position, including without limitation the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan.

 

(e)                                  Employee Benefits.  Employee shall be eligible to participate in Employer’s health and welfare benefit programs, 401(k) benefit program, life and disability insurance programs, and any other employee benefits, benefit plans, policies or programs Employer provides to its executive-level employees, in each case, as they may exist from time to time and subject to the terms and conditions thereof.  Nothing in this Agreement shall require Employer to maintain any benefit plan, or shall preclude Employer from terminating or amending any benefit plan from time to time.

 

(f)                                   Vacation and Holidays.  During the Employment Period, Employee shall be entitled to annual paid vacation in accordance with Employer’s policy applicable to executive-level employees, but in no event less than four (4) weeks of paid vacation during each full calendar year of employment.  Employee shall receive a pro-rated portion of such vacation during Employee’s initial and final partial calendar years of employment under this Agreement.  Unused, earned vacation shall not carry over from one calendar year to the next, unless Employer’s written policies otherwise provide for such carry over.  Upon termination of Employee’s employment for any reason, Employer shall pay Employee for any unused, earned vacation days based upon Employee’s then current Base Salary.  Employee shall also be entitled to all of the paid holidays recognized by Employer generally.

 

(g)                                  Automobile Allowance.  During the Employment Period, Employer shall pay Employee an annual automobile allowance of at least Fifteen Thousand Dollars ($15,000).  Such allowance shall be paid in accordance with Employer’s regular payroll practices, as may be in effect from time to time, but in no event less frequently than monthly.

 

4.                                      Termination.

 

(a)                                 Termination by Employer for Cause.  Employer may terminate Employee’s employment under this Agreement at any time for Cause after the Board, by the majority vote of its members (excluding, for this purpose, any employee member of the Board, if applicable) determines that the actions or inactions of Employee constitute Cause, and Employee’s employment should accordingly be terminated for Cause.  In the event of a termination of Employee by Employer for Cause, Employee or Employee’s estate, if applicable, shall be entitled to receive: (i) Employee’s accrued Base Salary through the termination date, paid within 30 days of the termination date; (ii) an amount for reimbursement, paid within 30 days following submission by Employee to Employer of appropriate supporting documentation for any unreimbursed business expenses properly incurred prior to the termination date by Employee pursuant to Section 3(b) and in accordance with Employer’s policy; (iii) any accrued and unpaid vacation pay, paid within 30 days of the termination date; and (iv) such employee benefits, if any, to which Employee or Employee’s dependents may be entitled under the employee benefit plans or programs of Employer, paid in accordance with the terms of the applicable plans or programs (the amounts described in clauses (i) through (iv) hereof being referred to as “Employee’s Accrued Obligations”).

 

For purposes of this Agreement, “Cause” means (A) Employee’s willful, continued and uncured failure to perform substantially Employee’s duties under this Agreement (other than any such failure resulting from incapacity due to medically documented illness or injury) for a period of fourteen (14) days following written notice by Employer to Employee of such failure, (B) Employee engaging in illegal conduct or

 

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gross misconduct that is demonstrably likely to lead to material injury to Employer, monetarily or otherwise, (C) Employee’s indictment or conviction of, or plea of nolo contendere to, a crime constituting a felony or any other crime involving moral turpitude, or (D) Employee’s violation of Section 7 of this Agreement or any other covenants owed to Employer by Employee.

 

(b)                                 Termination by Employer without Cause.  Employer may terminate Employee’s employment under this Agreement without Cause at any time upon thirty (30) days’ prior written notice to Employee.  In addition to the severance benefits provided in Section 5, in the event of Employee’s termination by Employer without Cause, Employer shall pay to Employee all of Employee’s Accrued Obligations.

 

(c)                                  Termination by Employee for Good Reason.  Employee may terminate Employee’s employment under this Agreement for Good Reason.  For purposes of this Agreement, “Good Reason” means the occurrence of any of the following:

 

(i)                                     Any material reduction of Employee’s authority, duties and responsibilities;

 

(ii)                                  Any material failure by Employer to comply with any of the terms and conditions of this Agreement;

 

(iii)                               Any failure to timely pay or provide Employee’s Base Salary, or any reduction in Employee’s Base Salary, excluding any Base Salary reduction made in connection with across the board salary reductions;

 

(iv)                              The requirement by Employer that Employee relocate Employee’s principal business location to a location more than fifty (50) miles from Employee’s principal base of operation as of the Effective Date; or

 

(v)                                 A Change of Control occurs and, if applicable, Employer fails to cause its successor (whether by purchase, merger, consolidation or otherwise) to assume or reaffirm Employer’s obligations under this Agreement without change.  For purposes of this Agreement, “Change of Control” shall have the meaning assigned to such term under the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan.

 

Within ninety (90) days of the occurrence of a Good Reason event, Employee may provide Employer with written notice of Employee’s termination of employment to be effective thirty (30) days after delivery of such notice, during which Employer shall have the opportunity to cure such Good Reason event.  In the event of a termination for Good Reason, in addition to the severance benefits provided in Section 5, Employer shall pay to Employee all of Employee’s Accrued Obligations.

 

(d)                                 Termination by Employee without Good Reason.  Employee may terminate Employee’s employment under this Agreement at any time without Good Reason, upon thirty (30) days’ prior written notice to Employer.  In the event of a termination described in this Section 4(d), Employer shall pay to Employee all of Employee’s Accrued Obligations.

 

(e)                                  Termination due to Employee’s death or Disability.  Employee’s employment under this Agreement shall terminate upon Employee’s (i) death, or (ii) “Disability,” which for purposes of this Agreement means a “Total Disability” (or equivalent) as defined under Employer’s Long Term Disability Plan in effect at the time of the Disability.  In the event of a termination described in this Section 4(e), Employer shall pay to Employee all of Employee’s Accrued Obligations.  In addition, (i) if Employee is

 

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participating in the health plans of Employer at the time of termination, Employer shall pay to Employee the premiums attributable to maintaining Employee’s (and Employee’s qualified beneficiaries’) insurance coverage under the Consolidated Omnibus Budget Reconciliation Act until the earlier of (A) the date that is twelve (12) months following the date of termination and (B) the date Employee is or becomes eligible for comparable coverage under health plans of another employer (the “Continued Benefits”), (ii) Employer shall pay to Employee (or Employee’s estate and/or beneficiaries), in a lump sum following effectiveness of the release described in Section 6 and at the same time Employer pays annual bonuses for such calendar year to its other executives, an amount equal to (x) the actual bonus Employee would have received under the Bonus Plan had Employee remained employed by Employer through the remainder of the calendar year in which termination occurred, multiplied by (y) a fraction, the numerator of which is the number of days Employee was employed in the calendar year in which termination occurred and the denominator of which is 365 and (iii) Employer shall pay to Employee (or Employee’s estate and/or beneficiaries) an amount equal to any annual bonus for a prior completed calendar year that is yet to be calculated and/or paid to Employee, paid as soon as practicable following effectiveness of the release described in Section 6 but in no event later than March 15 of the year following the calendar year to which such bonus relates (the “Earned But Unpaid Bonus”).

 

5.                                      Severance Benefits.  In the event of a termination of Employee’s employment under Section 4(b) or 4(c) of this Agreement, Employer shall provide Employee with the following severance benefits:

 

(a)                                 Employer shall pay to Employee an amount equal to the sum of (i) Employee’s annual Base Salary and (ii) Employee’s bonus at target for the year in which termination occurs, which shall be paid by Employer to Employee in a lump sum as soon as practicable following (and subject to) effectiveness of the release described in Section 6 but in no event later than sixty (60) days following the date of termination, provided that if such sixty (60) day period covers two taxable years, payment shall be made in the second taxable year.

 

(b)                                 The Continued Benefits; and

 

(c)                                  The Earned But Unpaid Bonus.

 

6.                                      Release of Claims.  As a condition to the receipt of any payments or benefits described in Section 5 of this Agreement, subsequent to the termination of the employment of Employee (other than any Accrued Benefits or any payment or benefits payable on account of Employee’s death), Employee shall be required to execute, and not subsequently revoke, within fifty (50) days following the termination of Employee’s employment a release, in a form reasonably satisfactory to Employer, of all claims arising out of or related to Employee’s employment or the termination thereof.

 

7.                                      Restricted Activities.

 

(a)                                 Acknowledgements.  Employee understands and acknowledges that Employer has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of wholesale, retail or consumer vehicle remarketing, including but not limited to vehicle auctions (whole car and salvage), online services, or dealer floor-plan financing.  Employee understands and acknowledges that as a result of these efforts, Employer has created, and continues to use and create, Confidential Information (as defined below) and that such Confidential Information is integral to providing Employer with a competitive advantage over others in the marketplace.  Employee further understands and acknowledges that the nature of Employee’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with Employer.

 

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(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, excluding information and materials generally known or available to the public, other than as a result of Employee’s breach of this Section 7, and including without limitation (A) trade secrets, (B) business and technical information that gives Employer a competitive advantage, and (C) information concerning Employer’s customers, suppliers, vendors, licensors, affiliates, financing sources, profits, revenues, financial condition, pricing, training programs, service techniques, service processes, marketing plans, and business strategies.

 

(c)                                  Intellectual Property.  Employee agrees to promptly disclose to Employer and hereby assigns and agrees to assign, without further compensation, to Employer, Employee’s entire right, title and interest in each and every invention (whether or not patentable), technological innovation, and copyrightable work, in which Employee participates during Employee’s employment with Employer whether or not during working hours, that pertains to Employer’s business or is aided by the use of time, material, or facilities of Employer.  Employee further agrees to perform all reasonable acts, including executing necessary documents, requested by Employer to assist it, without further compensation, in obtaining and enforcing its property rights in the above.

 

(d)                                 Non-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 within the United States or Canada perform for or on behalf of any Competitor (as defined below), the same or similar services as those that the Employee performed for Employer during Employee’s employment with Employer.  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, within the United States or Canada, engage in, own, operate, or control any Competitor.  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 (whole car or salvage), online services, or dealer floor plan financing within the United States or Canada, provided that Employer (either directly or indirectly through its controlled subsidiaries) is engaged in such businesses.

 

(e)                                  Non-Solicitation/Non-Interference.  During Employee’s employment with Employer and for a period of one (1) year immediately following the termination of Employee’s employment for any reason, Employee shall not (i) induce or attempt to induce any employee of Employer to leave the employ of Employer, or in any way interfere with the relationship between Employer and any of its employees, or (ii) induce or attempt to induce any customer, client, member, supplier, licensee, licensor or other business relation of Employer to cease doing business with Employer, or otherwise interfere with the business relationship between Employer and any such customer, client, member, supplier, licensee, licensor or business relation of Employer.

 

8.                                      Section 409A.  The payments and benefits under this Agreement and the terms of any release agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and the regulations promulgated thereunder (“Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement and any release

 

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agreement shall be interpreted and administered consistent with such intent.  If under this Agreement, an amount is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payments.  Without limiting the foregoing, solely to the extent required to avoid the imposition of any additional tax or interest to the Employee under Section 409A, any payments, benefits and other obligations under this Agreement that arise in connection with Employee’s “termination of employment,” “termination” or similar reference in this Agreement shall be triggered only if such termination of employment qualifies as a “separation from service” within the meaning under Section 409A.  Notwithstanding any other provision of this Agreement, if at the time of the termination of Employee’s employment, Employee is a “specified employee,” for purposes of Section 409A, and any payments or benefits upon such termination including but not limited to payments or benefits under this Agreement would otherwise result in additional tax or interest to the employee under Section 409A, Employee will not be entitled to receive such payments or benefits until the date that is six (6) months after the termination of the Employee’s employment for any reason, subject to earlier immediate payment if the employee dies during such six (6) month period.  To the extent required to avoid the imposition of any additional tax or interest under Section 409A, amounts reimbursable to under this Agreement shall be paid to Employee on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to Employee) during any one year may not affect amounts reimbursable or provided in any subsequent year.  If any provision of this Agreement would subject Employee to any additional tax or interest under Section 409A, then Employer shall use its best efforts to amend such provision; provided that Employer shall not incur any additional expense as a result of such amendment.  Notwithstanding any other provision hereof, in no event shall Employer be liable for, or be required to indemnify Employee for, any liability of Employee for taxes or penalties under Section 409A.

 

9.                                      Arbitration.  Any dispute, controversy or claim arising out of or relating to this Agreement, the breach, termination, enforcement, interpretation, or validity thereof (including the determination of the scope or applicability of this arbitration agreement), or its subject matter shall be subject and resolved by binding arbitration administered by a single arbitrator from the American Arbitration Association.  The parties acknowledge and agree that Employer is involved in transactions involving interstate commerce and that the Federal Arbitration Act shall govern any arbitration pursuant to this Agreement.  Such arbitration shall be conducted in accordance with the commercial rules and regulations promulgated by the American Arbitration Association applying the laws of the State of Indiana.  The arbitration shall be conducted in Indianapolis, Indiana.  Discovery shall be completed within ninety (90) days of the filing of the complaint and the arbitration shall be held no later than one hundred twenty (120) days after the filing of the complaint.  A record of the proceedings shall be kept by a qualified court reporter.  The decision of the arbitrator shall contain findings of fact and conclusions of law, and shall be made within thirty (30) days of the arbitration and shall be final and binding on the parties, and shall be unappealable.  The decision may be enforced in any court having jurisdiction over the parties and the subject matter.  Costs of the arbitrator shall be split equally between Employer and Employee.

 

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10.                               Miscellaneous Provisions.

 

(a)                                 Notices.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

 

	
To Employer:
    	
KAR Auction Services, Inc.
    
	
 
    	
13085 Hamilton Crossing   Blvd.
    
	
 
    	
Carmel, IN 46032
    
	
 
    	
Attention: Rebecca C. Polak, Esq.
    
	
 
    	
Email:   becca.polak@karauctionservices.com
    
	
 
    	
 
    
	
To Employee:
    	
At Employee’s address on file with Employer
    

 

(b)                                 Entire Agreement.  This Agreement sets forth the entire agreement between Employer and Employee with respect to the subject matter of this Agreement and fully supersedes all prior negotiations, representations and agreements, whether written or oral, between Employer and Employee with respect to the subject matter of this Agreement.

 

(c)                                  Severability.  The provisions of this Agreement are severable and shall be separately construed.  If any of them is determined to be unenforceable by any court, that determination shall not invalidate any other provision of this Agreement.

 

(d)                                 Amendment and Waiver.  This Agreement may not be modified, amended or waived in any manner except by a written document executed by Employer and Employee.  The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver or a waiver of any subsequent breach by such party of a provision of this Agreement.

 

(e)                                  No Mitigation.  In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Employee obtains other employment.

 

(f)                                   Successors and Assigns.  This Agreement and the covenants herein shall extend to and inure to the benefit of the successors and assigns of Employer.  Employer shall require any successor (whether by purchase, merger, consolidation or otherwise) to assume or reaffirm, as applicable, Employer’s obligations under this Agreement without change.  Failure of Employer to obtain such an assumption shall entitle Employee to terminate Employee’s employment under this Agreement for Good Reason.

 

(g)                                  Headings.  Numbers and titles to Sections hereof are for information purposes only and, where inconsistent with the text, are to be disregarded.

 

(h)                                 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together, shall be and constitute one and the same instrument.

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

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

 

	
“Employer”
    	
 
    	
“Employee”
    
	
 
    	
 
    	
 
    
	
KAR AUCTION SERVICES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James P. Hallett
    	
 
    	
/s/ Thomas Caruso
    
	
 
    	
 
    	
 
    	
 
    
	
Printed:
    	
James P. Hallett
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
Chief Executive Officer

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