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KAR Auction Services, Inc. – ‘DEF 14A’ for 6/10/14

On:  Tuesday, 4/29/14, at 4:35pm ET   ·   Effective:  4/29/14   ·   For:  6/10/14   ·   Accession #:  1047469-14-4353   ·   File #:  1-34568

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/29/14  KAR Auction Services, Inc.        DEF 14A     6/10/14    1:1.3M                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Solicitation Material              HTML    717K 

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TABLE OF CONTENTS

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

SCHEDULE 14A

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

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13085 Hamilton Crossing Boulevard
Carmel, Indiana 46032

April 29, 2014

Dear Stockholder:

        We cordially invite you to attend KAR Auction Services' annual meeting of stockholders. The meeting will be held on June 10, 2014, at 9:00 a.m., Eastern Daylight Time, at the Renaissance Indianapolis North Hotel, 11925 North Meridian Street, in Carmel, Indiana 46032.

        As a KAR Auction Services stockholder, your vote is important. At the meeting, stockholders will vote on a number of important matters. Even if you are planning to attend the annual meeting in person, you are strongly encouraged to vote your shares through one of the methods described in the enclosed proxy statement. Please take the time to carefully read each of the proposals described in the attached proxy statement. The Board of Directors would appreciate your support on our recommendations for the following proposals:

•

Election of the ten nominated directors;



•

Advisory vote approving the compensation of our named executive officers;



•

Approval of the amendment and restatement of the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan; and



•

Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2014.

        This year we are pleased to take advantage of the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of our annual meeting. The proxy statement contains instructions on how you can request a paper copy of the proxy statement and annual report.

        Thank you for your continued support of KAR Auction Services.

		Sincerely,
		James P. Hallett Chief Executive Officer

        This proxy statement is dated April 29, 2014 and is first being distributed to stockholders on or about April 29, 2014.

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13085 Hamilton Crossing Boulevard
Carmel, Indiana 46032

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

		On Behalf of the Board of Directors,
April 29, 2014 Carmel, Indiana		Rebecca C. Polak Executive Vice President, General Counsel and Secretary

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Notice of Internet Availability of Proxy Materials for the Annual Meeting

        The proxy statement for the Annual Meeting and the Annual Report to Stockholders for the fiscal year ended December 31, 2013, each of which is being provided to stockholders prior to or concurrently with this notice, are also available to you electronically via the Internet. We encourage you to review all of the important information contained in the proxy materials before voting. To view the proxy statement and Annual Report to Stockholders on the Internet, visit the "Investor Relations" section of our website, under the "Proxy Statement" link at www.karauctionservices.com.

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PROXY STATEMENT SUMMARY

        This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement before voting. For more complete information regarding the Company's 2013 performance, please review the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

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Business Highlights

        Despite the impact of Superstorm Sandy on our salvage auction business, KAR delivered solid growth in volume of total vehicles sold, revenues and Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and is defined and reconciled to the GAAP measure, net income (loss), in our Annual Report on Form 10-K for the year ended December 31, 2013 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—EBITDA and Adjusted EBITDA."

        Specific highlights for fiscal 2013 included:

•

Total vehicles sold for our ADESA, Inc. ("ADESA") and Insurance Auto Auctions, Inc. ("IAA") business segments rose approximately 12% to 3.7 million units.



•

Net revenue was up 11% to more than $2.1 billion.



•

Adjusted EBITDA rose 8% to $538.2 million.



•

We reduced our leverage, as measured by Net Debt / Adjusted EBITDA, to 3.07X.



•

We increased our annual dividend from $0.76 to $1.00 per share.



•

Shares of KAR stock rose 46% to $29.55.

Corporate Governance

        We are committed to high standards of ethical and business conduct and strong corporate governance practices. This commitment is highlighted by the practices described below as well as the information contained on our website at www.karauctionservices.com on the "Investor Relations" page under the link "Corporate Governance":

•

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



•

Director Independence:    Eight of our ten director nominees are independent, and our Board of Directors' committees are comprised entirely of independent directors.



•

Board Leadership:    We separate the roles of Chairman of the Board and Chief Executive Officer. Our Chairman of the Board is a non-executive chairman.



•

Executive Sessions:    Our independent directors meet in executive session at regularly scheduled Board of Directors' meetings.



•

Board of Directors Risk Oversight:    Our Board of Directors provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to a committee of the Board of Directors (in which case the Board of Directors may maintain oversight over such risks through the receipt of reports from the committees). The Audit Committee maintains initial oversight over risks related to the integrity of our financial statements; internal controls over financial reporting and disclosure controls and procedures (including the performance of our internal audit function); the performance of the independent auditor; and oversees our responses to ethics issues arising from our whistleblower hotline. The Compensation Committee maintains oversight over risks related to our compensation practices. The Nominating and Corporate Governance Committee monitors potential risks relating to the effectiveness of the Board of Directors, notably director succession, composition of the Board of Directors and the principal policies that guide our governance.



•

Cessation of Controlled Company Status:    At the time of our initial public offering, we qualified as a "controlled company" within the meaning of the NYSE corporate governance standards, as KAR Holdings II, LLC ("KAR LLC") controlled a majority of the voting power of our

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outstanding common stock. As of June 6, 2013, KAR LLC ceased to hold a majority of our outstanding common stock and, as of the date of this proxy statement, does not hold any shares of our common stock. Accordingly, we are no longer a controlled company, and we continue to evaluate our corporate governance structure in light of such transition. We currently have a majority of independent directors under the NYSE standards and each of our committees is comprised entirely of independent directors. See "Board of Directors Structure and Corporate Governance."

Executive Compensation

        During the past five years, including following the sale by our former equity sponsors of all of their holdings of our common stock in 2013, we have maintained a compensation program structured to achieve close connection between executive pay and company performance.

•

Pay for Performance Alignment:    During the past 5 fiscal years, including 2013, we have demonstrated close alignment between our total stockholder return (TSR) performance and the compensation of our Chief Executive Officer, as shown in the chart below.

5-Year Pay Alignment Chart

•

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



•

Independent Compensation Consultant:    In 2013, our compensation committee engaged ClearBridge Compensation Group as its independent compensation consultant.



•

Performance-Based Compensation Awards:    The equity awards granted to our named executive officers in late 2013 and in 2014 are heavily performance-based, consisting of restricted stock units that vest based on achievement of relative TSR and adjusted earnings per share goals and stock options.



•

Incentive Compensation Recoupment Policy:    In 2014, we adopted a policy providing for the recovery of incentive compensation in the event we are required to prepare an accounting restatement due to any executive officer's intentional misconduct.



•

Anti-Hedging and Pledging of Company Stock Policy:    In addition to our existing anti-pledging of Company stock policy, we adopted a formal anti-hedging of Company stock policy in 2014, which is applicable to our officers and directors.

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

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KAR AUCTION SERVICES, INC.
13085 Hamilton Crossing Boulevard
Carmel, Indiana 46032

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE ANNUAL MEETING

Q:

Why am I receiving these materials?

A:

We are providing these proxy materials to you in connection with the solicitation, by the Board of Directors of KAR Auction Services, Inc. (the "Company" or "KAR Auction Services"), of proxies to be voted at the Company's 2014 annual meeting of stockholders and at any adjournments or postponements thereof. Stockholders are invited to attend the annual meeting to be held on June 10, 2014 beginning at 9:00 a.m., Eastern Daylight Time, at the Renaissance Indianapolis North Hotel, 11925 North Meridian Street, Carmel, Indiana 46032. Our proxy materials are first being distributed to stockholders on or about April 29, 2014.

Q:

What proposals will be voted on at the annual meeting?

A:

There are four proposals scheduled to be voted on at the annual meeting:

•

To elect ten directors to the Board of Directors;



•

To provide an advisory vote to approve the compensation of our named executive officers;



•

To approve the amendment and restatement of the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan (the "Omnibus Plan"); and



•

To ratify the appointment of KPMG LLP ("KPMG") as our independent registered public accounting firm for 2014.

Q:

What is the Board of Directors' voting recommendation?

A:

The Company's Board of Directors recommends that you vote your shares:

•

"FOR" each of the nominees to the Board of Directors;



•

"FOR" the approval, on an advisory basis, of the compensation of our named executive officers;



•

"FOR" the approval of the amendment and restatement of the Omnibus Plan; and



•

"FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm for 2014.

Q:

Who is entitled to vote?

A:

All shares owned by you as of the record date, which is the close of business on April 16, 2014, may be voted by you. You may cast one vote per share of common stock that you held on the record date.

These shares include shares that are:

•

held directly in your name as the stockholder of record; and

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•

held for you as the beneficial owner through a stockbroker, bank or other nominee, including shares purchased under the KAR Auction Services, Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase Plan").

On the record date, KAR Auction Services had approximately 139,772,786 shares of common stock issued and outstanding.

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A:

Many of our stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

Stockholder of Record.    If your shares are registered directly in your name with the Company's transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent to you directly by KAR Auction Services. As the stockholder of record, you have the right to grant your voting proxy directly to the Company or to vote in person at the annual meeting. You may vote on the Internet, by telephone or by mail, as described below under the heading "How can I vote my shares without attending the annual meeting?"

Beneficial Owner.    If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in "street name" and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker on how to vote your shares and are also invited to attend the annual meeting. To vote these shares in person at the annual meeting, you must obtain a signed proxy from the record holder giving you the right to vote the shares. You may also vote by Internet, by telephone or by mail, as described below under "How can I vote my shares without attending the annual meeting?"

Q:

How can I vote my shares in person at the annual meeting?

A:

Stockholder of Record.    Shares held directly in your name as the stockholder of record may be voted in person at the annual meeting. If you choose to vote your shares in person at the annual meeting, please bring proof of identification. Even if you plan to attend the annual meeting, the Company recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the annual meeting. See "How can I vote my shares without attending the annual meeting?"

Beneficial Owner.    Shares held in street name may be voted in person by you only if you obtain an account statement or letter from your bank, broker or other nominee indicating that you are the beneficial owner of the shares and a legal proxy from the record holder giving you the right to vote the shares. The account statement or letter must show that you were the beneficial owner of shares on April 16, 2014, the record date.

Q:

How can I vote my shares without attending the annual meeting?

A:

Whether you hold your shares directly as the stockholder of record or beneficially in street name, you may direct your vote without attending the annual meeting by voting in one of the following manners:

•

Internet.    Go to www.proxyvote.com and follow the instructions. You will need the control number included on your proxy card or voting instruction form;



•

Telephone.    Dial 1-800-690-6903. You will need the control number included on your proxy card or voting instruction form; or

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•

Mail.    Complete, date and sign your proxy card or voting instruction card and mail it using the enclosed, pre-paid envelope.

If you vote on the Internet or by telephone, you do not need to return your proxy card or voting instruction card. Internet and telephone voting for stockholders will be available 24 hours a day, and will close at 11:59 p.m., Eastern Daylight Time, on June 9, 2014.

Q:

If I am an employee holding shares pursuant to the Employee Stock Purchase Plan, how will my shares be voted?

A:

Employees holding stock acquired through the Employee Stock Purchase Plan will receive a voting instruction card covering all shares held in their individual account from Computershare, the plan record keeper. The voting instruction cards have an earlier return date than proxy cards. The record keeper for the Employee Stock Purchase Plan will vote your shares (i) in accordance with the specific instructions on your returned voting instruction card; or (ii) in its discretion, if you return a signed voting instruction card with no specific voting instructions.

Q:

What is the quorum requirement for the annual meeting?

A:

A quorum is necessary to hold the annual meeting. A quorum at the annual meeting exists if the holders of a majority of the Company's capital stock issued and outstanding and entitled to vote at the annual meeting are present in person or represented by proxy. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker does not vote on some matter on the proxy card because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

Q:

What happens if I do not give specific voting instructions?

A:

Stockholder of Record.    If you are a stockholder of record and you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board of Directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the annual meeting.

Beneficial Owners.    If you are a beneficial owner of shares held in street name and do not provide the organization (e.g., broker or bank) that holds your shares in "street name" with specific voting instructions, the organization that holds your shares may generally vote on routine matters (Proposal No. 4 (ratification of auditor)) but cannot vote on non-routine matters (Proposal No. 1 (director elections), Proposal No. 2 (advisory vote on the compensation of our named executive officers) and Proposal No. 3 (approval of the amendment and restatement of the Omnibus Plan)). If the organization that holds your shares does not receive instructions from you on how to vote your shares on Proposals No. 1, 2 and 3, such organization will inform the inspector of election that it does not have the authority to vote on these matters with respect to your shares. This is generally referred to as a "broker non-vote." Therefore, we urge you to give voting instructions to your broker. Shares represented by such broker non-votes will be counted in determining whether there is a quorum. Because broker non-votes are not considered shares entitled to vote, they will have no effect on the outcome of any proposal other than reducing the number of shares present in person or by proxy and entitled to vote from which a majority is calculated.

Q:

Which proposals are considered "routine" or "non-routine?"

A:

The ratification of the appointment of KPMG as our independent registered public accounting firm for 2014 (Proposal No. 4) is considered a routine matter under applicable rules. A broker or

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other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal No. 4.

The election of directors (Proposal No. 1), the advisory vote on the compensation of our named executive officers (Proposal No. 2) and the approval of the amendment and restatement of the Omnibus Plan (Proposal No. 3) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposal Nos. 1, 2 and 3.

Q:

What is the voting requirement to approve each of the proposals?

A:

Ten director nominees have been nominated for election at the annual meeting. Directors will be elected by a plurality of the votes cast in the election of directors at the annual meeting, either in person or represented by a properly authorized proxy. This means that the ten nominees who receive the largest number of "FOR" votes cast will be elected as directors. Stockholders cannot cumulate votes in the election of directors. "WITHHOLD" votes and broker non-votes will not have any effect on the election of directors, except in the case of "WITHHOLD" votes to the extent they revoke earlier dated proxies.

The advisory approval of the compensation of our named executive officers, the approval of the amendment and restatement of the Omnibus Plan and the ratification of the appointment of our independent registered public accounting firm require the affirmative vote of a majority of the votes represented at the meeting and entitled to vote on the proposals. In accordance with Delaware law, only votes cast "FOR" a matter constitute affirmative votes. A properly executed proxy marked "abstain" with respect to the advisory approval of our executive compensation, the approval of the amendment and restatement of the Omnibus Plan and/or the ratification of the appointment of our independent registered public accounting firm will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, with respect to Proposals Nos. 2, 3 and 4, abstentions will have the same effect as negative votes or votes "AGAINST" that matter. Broker non-votes will have no effect on Proposals Nos. 2 and 3.

Q:

What does it mean if I receive more than one proxy or voting instruction card?

A:

It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.

Q:

Who will count the vote?

A:

The votes will be counted by the inspector of election appointed for the annual meeting.

Q:

Can I revoke my proxy or change my vote?

A:

Yes. You may revoke your proxy or change your voting instructions at any time prior to the vote at the annual meeting by:

•

providing written notice of revocation to the Secretary of the Company at 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032;



•

delivering a valid, later-dated proxy or a later-dated vote on the Internet or by telephone; or



•

attending the annual meeting and voting in person.

Please note that your attendance at the annual meeting in person will not cause your previously granted proxy to be revoked unless you vote in person at the annual meeting to revoke your proxy. If you wish to revoke your proxy, you must do so in sufficient time to permit the necessary

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examination and tabulation of the subsequent proxy or revocation before the vote is taken. Shares held in street name may be voted in person by you at the annual meeting only if you obtain a signed proxy from the record holder giving you the right to vote the shares.

Q:

Who will bear the cost of soliciting votes for the annual meeting?

A:

The Board of Directors of the Company is soliciting your proxy to vote your shares of common stock at the annual meeting. We have engaged MacKenzie Partners, Inc., to assist in the solicitation of proxies for the annual meeting for a fee of approximately $15,000 plus reimbursement of reasonable out-of-pocket expenses. KAR Auction Services will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the distribution of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. The Company also may reimburse brokerage firms and other persons representing beneficial owners of shares of KAR Auction Services' common stock for their expenses in forwarding solicitation material to such beneficial owners.

Q:

I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?

A:

The Company has adopted a procedure called "householding" which the Securities and Exchange Commission (the "SEC") has approved. Under this procedure, the Company is delivering a single copy of this proxy statement and the Company's Annual Report to multiple stockholders who share the same address unless the Company has received contrary instructions from one or more of the stockholders. This procedure reduces the Company's costs. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, a separate copy of this proxy statement and the Company's Annual Report will be promptly delivered to any stockholder at a shared address to which the Company delivered a single copy of any of these documents. If you prefer to receive separate copies of the proxy statement or annual report, contact Broadridge Financial Solutions, Inc. by calling 1-800-542-1061 or in writing at 51 Mercedes Way, Edgewood, New York 11717, Attention: Householding Department.

In addition, if you currently are a stockholder who shares an address with another stockholder and would like to receive only one copy of future notices and proxy materials for your household, you may notify your broker if your shares are held in a brokerage account or you may notify us if you hold registered shares. Registered stockholders may notify us by contacting Broadridge Financial Solutions, Inc. at the above telephone number or address.

Q:

What is notice and access and why did KAR Auction Services elect to use it?

A:

This year, for the first time, we are making the proxy materials available to stockholders electronically via the Internet under the Notice and Access regulations of the SEC. Most of our stockholders will receive a Notice of Electronic Availability ("Notice") in lieu of receiving a full set proxy materials in the mail. The Notice includes information on how to access and review the proxy materials, and how to vote, via the Internet. We believe this method of delivery will decrease costs, expedite distribution of proxy materials to you, and reduce our impact on the environment. Stockholders who receive a Notice but would like to receive a printed copy of the proxy materials in the mail should follow the instructions in the Notice for requesting such materials.

Q:

How can I obtain a copy of KAR Auction Services' Annual Report on Form 10-K?

A:

Copies of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed with the SEC, are available to stockholders free of charge on KAR Auction Services' website at www.karauctionservices.com or by writing to KAR Auction Services, Inc., Investor Relations, 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032.

Q:

Where can I find the voting results of the annual meeting?

A:

KAR Auction Services will announce preliminary voting results at the annual meeting and publish preliminary, or final results if available, in a Current Report on Form 8-K within four business days of the annual meeting.

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ELECTION OF DIRECTORS

PROPOSAL NO. 1

Directors Elected Annually

        Our Board of Directors has nominated the ten individuals named below to stand for election to the Board of Directors at the annual meeting. Messrs. Ament, Finlayson, Goldberg, Moore, O'Brien and Ward, who currently serve on our Board of Directors, are not standing for re-election at the annual meeting. KAR Auction Services' directors are elected each year by the stockholders at the annual meeting. We do not have a staggered or classified board. Each director's term will last until the 2015 annual meeting of stockholders and until such director's successor is duly elected and qualified, or such director's earlier death, resignation or removal. Directors are elected by a plurality of the votes cast at the annual meeting.

Director Independence

        The Board of Directors is responsible for determining the independence of our directors. Under the NYSE listing standards, a director qualifies as independent if the Board of Directors affirmatively determines that the director has no material relationship with us. While the focus of the inquiry is independence from management, the Board is required to broadly consider all relevant facts and circumstances in making an independence determination. Based upon its evaluation, our Board has affirmatively determined that the following directors and director nominees meet the standards of "independence" established by the NYSE: David J. Ament, Ryan M. Birtwell, Donna R. Ecton, Robert M. Finlayson, Peter R. Formanek, Michael B. Goldberg, Mark E. Hill, Lynn Jolliffe, Michael T. Kestner, John P. Larson, Church M. Moore, Stephen E. Smith and Jonathan P. Ward. Brian T. Clingen, our Chairman of the Board, James P. Hallett, our CEO, and Thomas C. O'Brien, CEO of IAA, are not independent directors.

Board Nominations and Director Nomination Process

        The Board of Directors is responsible for nominating members for election to the Board of Directors and for filling vacancies on the Board of Directors that may occur between the annual meetings of stockholders. The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommending candidates to the Board of Directors for board membership. When formulating its Board of Directors membership recommendations, the Nominating and Corporate Governance Committee may also consider advice and recommendations from others, including stockholders, as it deems appropriate.

        Board candidates also are selected based upon various criteria including experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board of Directors. Board members are expected to prepare for, attend and participate in all Board of Directors and applicable committee meetings and the Company's annual meetings of stockholders.

        In accordance with its charter, the Board of Directors also considers candidates for election as a director of the Company recommended by any stockholder, provided that the recommending stockholder follows the procedures set forth in Section 5 of the Company's Amended and Restated By-Laws for nominations by stockholders of persons to serve as directors, including the requirements of timely notice and certain information to be included in such notice. The Board of Directors generally evaluates such candidates in the same manner by which it evaluates other director candidates considered by the Board of Directors.

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

        Previously, KAR LLC had the right to directly nominate individuals to our Board of Directors for so long as KAR LLC owned at least 5% of our outstanding common stock pursuant to a director designation agreement entered into in connection with the Company's initial public offering. See "Certain Related Party Relationships—Historical Transactions with Former Equity Sponsors—Director Designation Agreement." During 2013, KAR LLC sold all if its shares of Company common stock in a series of transactions, and accordingly, KAR LLC's director nomination rights have terminated and are of no further effect.

Diversity

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

Information Regarding the Nominees for Election to the Board of Directors

        The following information is furnished with respect to each nominee for election as a director. Seven of the nominees are currently directors. Each of the nominees has consented to being named in this proxy statement and to serve as a director if elected. If a nominee is unavailable to serve as a director, your proxies will have the authority and discretion to vote for another nominee proposed by the Board of Directors, or the Board of Directors may reduce the number of directors to be elected at the annual meeting. The ages of the nominees are as of the date of the annual meeting, June 10, 2014.

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BOARD OF DIRECTORS STRUCTURE AND CORPORATE GOVERNANCE

Role of the Board of Directors

        The Company's business and affairs are managed under the direction of the Board of Directors, which is the Company's ultimate decision-making body, except with respect to those matters reserved to the Company's stockholders. The Board of Directors, among other things, establishes the Company's overall corporate policies, evaluates the Company's Chief Executive Officer and the senior leadership team and oversees senior management. The Board of Directors also oversees the Company's business strategy and planning, as well as the performance of management in executing the Company's business strategy, assessing and managing risks and managing the Company's day-to-day operations.

Board Leadership

        Currently, KAR Auction Services separates the roles of Chairman of the Board of Directors and Chief Executive Officer. Separating these roles allows our Chief Executive Officer to focus on the day-to-day management of our business and our Chairman of the Board of Directors to lead the Board of Directors and focus on providing advice and general oversight of management. Given the time and effort that is required of each of these positions, the Company currently believes it is best to separate these roles. However, neither the Company's Amended and Restated By-Laws nor the Company's Corporate Governance Guidelines requires that the Company separate these roles and the Board of Directors does not have a policy on whether the same person should serve as both the Chief Executive Officer and Chairman of the Board of Directors, or if the roles must remain separate. The Board of Directors believes that it should have the flexibility to make these determinations from time to time in the way that it believes best to provide appropriate leadership for the Company under then-existing circumstances.

Board of Directors Meetings and Attendance

        The Board of Directors held 13 meetings during 2013. All of the incumbent directors attended at least 75% of the meetings of the Board of Directors and Board committees on which they served during 2013. As stated in our Corporate Governance Guidelines, each director is expected to attend all annual meetings of stockholders. Last year's annual meeting of stockholders was attended, either in person or by telephone, by all of the directors.

Committees of the Board of Directors

        In 2013, the Board of Directors maintained three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. A description of each Board committee is set forth below.

        Audit Committee.    Our Audit Committee assists the Board of Directors in its oversight of the integrity of our financial statements, our independent registered public accounting firm's qualifications and independence and the performance of our independent registered public accounting firm. The Audit Committee reviews the audit plans and findings of our independent registered public accounting firm and our internal audit team and tracks management's corrective action plans where necessary; reviews our financial statements, including any significant financial items and changes in accounting policies or practices, with our senior management and independent registered public accounting firm; reviews our financial risk and control procedures, compliance programs and significant tax, legal and regulatory matters; and has the sole discretion to appoint annually our independent registered public accounting firm, evaluate its independence and performance and set clear hiring policies for employees or former employees of the independent registered public accounting firm. The Audit Committee held six meetings during 2013. Messrs. Finlayson, Formanek, Kestner and Ward, who comprise the Audit Committee, are "financially literate" under the rules of the New York Stock Exchange (the "NYSE").

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Mr. Finlayson serves as Chairman of the Audit Committee and each of Messrs. Finlayson, Formanek and Kestner have been designated as an "audit committee financial expert" as that term is defined by the SEC. In addition, the Board of Directors has determined that each of the members of the Audit Committee meets the standards of "independence" established by the NYSE and is "independent" under the independence standards for audit committee members adopted by the SEC. If all of our director nominees are elected at the annual meeting, we expect to appoint Messrs. Kestner, Larson and Smith and Ms. Jolliffe as members of the Audit Committee following the annual meeting.

        Compensation Committee.    The Compensation Committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The Compensation Committee establishes, reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and approves the compensation of these officers based on such evaluations. The Compensation Committee also administers the issuance of stock options and other awards under our equity plans. The Compensation Committee held 11 meetings during 2013. The Compensation Committee is currently comprised of Messrs. Formanek and Moore and Ms. Ecton. Mr. Moore serves as Chairman of the Compensation Committee. Mr. Clingen, Sanjeev Mehra and Gregory P. Spivy served on the Compensation Committee during a portion of 2013. All of the current and former members of the Compensation Committee are, or were during their tenure on the committee, independent under the NYSE rules (including the new enhanced independence requirements for Compensation Committee members), except for Mr. Clingen. If all of our director nominees are elected at the annual meeting, we expect to appoint Messrs. Formanek and Larson, Ms. Ecton and Ms. Jolliffe as members of the Compensation Committee following the annual meeting.

        The Compensation Committee retained ClearBridge Compensation Group ("ClearBridge") as its independent compensation consultant in 2013. During 2013, ClearBridge provided advice to the Compensation Committee with respect to the assessment of the Company's executive compensation practices, evaluation of long-term incentive compensation practices, designing new long-term equity awards, and related compensation matters. The Compensation Committee has reviewed the independence of ClearBridge in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that ClearBridge's work for the Compensation Committee does not raise any conflict of interest.

        Nominating and Corporate Governance Committee.    The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board of Directors regarding candidates for directorships and the size and composition of the Board of Directors. In addition, the Nominating and Corporate Governance Committee is responsible for overseeing our Corporate Governance Guidelines and reporting and making recommendations to the Board of Directors concerning governance matters. The Nominating and Corporate Governance Committee held four meetings during 2013. The Nominating and Corporate Governance Committee is comprised of Messrs. Birtwell, Goldberg, Moore and Ward. Mr. Birtwell serves as Chairman of the Nominating and Corporate Governance Committee. Kelly J. Barlow and Mr. Mehra served on the Nominating and Corporate Governance Committee during 2013. All of the current and former members of the Nominating and Corporate Governance Committee are, or were during their tenure on the committee, independent under the NYSE rules. If all of our director nominees are elected at the annual meeting, we expect to appoint Messrs. Birtwell, Hill and Smith as members of the Nominating and Corporate Governance Committee following the annual meeting.

        Each of our committees operates pursuant to a written charter. Copies of the committee charters are available on KAR Auction Services' website at www.karauctionservices.com on the "Investor Relations" page under the link "Corporate Governance." The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the SEC.

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Board of Directors' Oversight of Risk

        Our management is responsible for the management and assessment of risk at the Company, including communication of the most material risks to the Board of Directors and its committees. The Board of Directors provides oversight with respect to risk practices implemented by management, except for the oversight of risks that have been specifically delegated to a committee of the Board of Directors. Even when the oversight of a specific area of risk has been delegated to a committee, the Board of Directors may maintain oversight over such risks through the receipt of reports from the committee chairpersons to the Board of Directors at each regularly scheduled Board of Directors meeting. The Board of Directors and committee reviews occur principally through the receipt of regular reports from management to the Board of Directors on these areas of risk, and discussions with management regarding risk assessment and risk management.

        At its regularly scheduled meetings, the Board of Directors generally receives a number of reports which include information relating to risks faced by the Company. The Company's Chief Financial Officer provides a report on the Company's results of operations, its liquidity position, including an analysis of prospective sources and uses of funds, and the implications to the Company's debt covenants and credit rating, if any. The Chief Executive Officer of each primary business unit provides an operational report, which includes information relating to strategic, operational and competitive risks. Finally, the Company's General Counsel provides a privileged report which provides information regarding the status of the Company's material litigation and related matters, including environmental updates and the Company's continuing compliance with applicable laws and regulations. At each regularly scheduled Board of Directors meeting, the Board of Directors also receives reports from committee chairpersons, which may include a discussion of risks initially overseen by the committees for discussion and input from the Board of Directors. As noted above, in addition to these regular reports, the Board of Directors receives reports on specific areas of risk from time to time, such as regulatory, cyclical or other risks that are not covered in the regular reports given to the Board of Directors and described above.

        The Board of Directors' leadership structure, through its committees, also supports its role in risk oversight. The Audit Committee maintains initial oversight over risks related to the integrity of the Company's financial statements; internal controls over financial reporting and disclosure controls and procedures (including the performance of the Company's internal audit function); the performance of the independent auditor; and oversees the Company's responses to ethics issues arising from the Company's whistleblower hotline. The Company's Compensation Committee maintains oversight over risks related to the Company's compensation practices. The Nominating and Corporate Governance Committee monitors potential risks relating to the effectiveness of the Board of Directors, notably director succession, composition of the Board of Directors and the principal policies that guide the Company's governance.

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Corporate Governance Documents

        The Board of Directors has adopted the following corporate governance documents:

        We expect that any amendments to the codes of ethics, or any waivers of their requirements for executive officers and directors, will be disclosed on the Company's website. The foregoing documents are available at www.karauctionservices.com under the "Investor Relations" link on the "Corporate Governance" page and in print to any stockholder who requests them. Requests should be made to KAR Auction Services, Inc., Investor Relations, 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032. The information on our website is not part of this proxy statement and is not deemed incorporated by reference into this proxy statement or any other public filing made with the SEC.

Cessation of "Controlled Company" Status

        At the time of our initial public offering, we qualified as a "controlled company" within the meaning of the NYSE corporate governance standards, as KAR LLC controlled a majority of the voting power of our outstanding common stock. As of June 6, 2013, KAR LLC ceased to hold a majority of our outstanding common stock and, as of the date of this proxy statement, does not hold any shares of our common stock. As a controlled company, we were exempt from compliance with certain NYSE corporate governance standards, including (i) the requirement that a majority of the Board of Directors consist of independent directors; (ii) the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors; and (iii) the requirement that we have a compensation committee that is composed entirely of independent directors.

        The NYSE listing rules provide that, to the extent a controlled company ceases to qualify as such, it is required to comply with the corporate governance requirements from which it was previously exempt as follows:

•

The company must satisfy the majority independent board requirement within one year of the date its status changed; and



•

The company must have at least one independent member on its nominating committee and at least one independent member on its compensation committee by the date its status changed, at

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least a majority of independent members on each committee within 90 days of the date its status changed and fully independent committees within one year of the date its status changed.

        As of the date of this proxy statement, ten of our 13 directors are independent under NYSE standards, and each of our committees is comprised entirely of independent directors. In addition, eight of our ten nominees are independent.

Compensation Committee Interlocks and Insider Participation

        During the fiscal year ended December 31, 2013, Messrs. Clingen, Formanek, Mehra, Moore and Spivy and Ms. Ecton served as members of the Compensation Committee. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or our Compensation Committee. None of the individuals serving as members of the Compensation Committee during 2013 is now or was previously an officer or employee of the Company, other than Mr. Clingen who is the Chairman of the Board of Directors and served as the Company's Chief Executive Officer from April 2007 to September 2009. See "Certain Related Party Relationships" for a description of certain relationships between the Company and members of the Compensation Committee or their affiliated companies.

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934, as amended, requires KAR Auction Services' directors and executive officers and persons who own more than 10% of the issued and outstanding shares of the Company's common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC and the NYSE. Based solely on a review of such reports and written representations from the directors and executive officers, the Company believes that all such filing requirements were met during 2013.

DIRECTOR COMPENSATION

        We use a combination of cash and stock-based incentive compensation to attract and retain independent, qualified candidates to serve on the Board of Directors. In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties as well as the skill level we require of members of our Board of Directors. As discussed below, we have revised our director compensation program for 2014 in connection with the ongoing transition of our Board of Directors upon KAR LLC losing its director nomination rights pursuant to its divestiture of its holdings of our Company stock in 2013.

Cash and Stock Retainers

        Cash.    Members of the Board of Directors who are not our employees nor employed by Kelso Investment Associates VII, L.P., GS Capital Partners VI, L.P., ValueAct Capital Master Fund, L.P. or Parthenon Investors II, L.P. and their respective affiliates (collectively, the "Former Equity Sponsors"), which, prior to their divestiture of our common stock in 2013, collectively owned through KAR LLC a majority of the common stock of KAR Auction Services, were entitled to receive an annual cash retainer of $50,000 during 2013. Such directors may elect to receive their annual cash retainer in common stock. The Chairperson of the Audit Committee received an additional cash retainer of $10,000 during 2013. One-fourth of the annual cash retainer is paid at the end of each quarter, provided that the director served as a director in such fiscal quarter. All of our directors are reimbursed for reasonable expenses incurred in connection with attending Board of Directors meetings and committee meetings.

        The Company's non-employee director compensation program was revised effective January 1, 2014 to provide for (i) a $75,000 annual cash retainer (increased from $50,000); and (ii) additional

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annual cash retainer amounts of $20,000 for the chair of the Audit Committee; $15,000 for the chair of the Compensation Committee; and $10,000 for the chair of the Nominating and Corporate Governance Committee.

        Stock.    In addition to the annual cash compensation, directors who are not employed by us or the Former Equity Sponsors received an annual stock retainer of $75,000 of our common stock in the form of restricted stock during 2013. Pursuant to our Policy on Granting Equity Awards, unless specifically provided otherwise by the Compensation Committee or the Board of Directors, annual grants for directors are effective on the date of the annual meeting at which the director was elected or re-elected. One-fourth of the annual restricted stock grant vests quarterly following the date of the grant. The number of shares of our common stock received is based on the value of the shares on the date of the restricted stock grant.

        The Company's non-employee director compensation program was revised effective January 1, 2014 to provide for a $100,000 annual restricted stock retainer (increased from $75,000), which is normally granted on the date of the annual meeting of stockholders and vests quarterly over a one-year period. On January 2, 2014, Ms. Ecton and Messrs. Clingen, Kestner and Smith each received pro-rata restricted stock grants worth approximately $50,000 and Messrs. Finlayson, Formanek and Ward received a pro-rata grant worth approximately $12,500 to reflect the increased stock retainer amount for 2014.

Directors Deferred Compensation Plan

        Our Board of Directors adopted the KAR Auction Services, Inc. Directors Deferred Compensation Plan (the "Director Deferred Compensation Plan") in December 2009. Pursuant to the terms of the Director Deferred Compensation Plan, each director who is not employed by us or the Former Equity Sponsors may elect to defer the receipt of his cash director fees into a pre-tax interest-bearing deferred compensation account, which account accrues interest as described in the Director Deferred Compensation Plan. Directors also may choose to receive all or a portion of their annual stock retainer in the form of a deferred share account. The plan provides that the amount of cash in a director's deferred cash account, plus a number of shares of common stock equal to the number of shares in the director's deferred share account, will be delivered to a director within 60 days following the date of the director's departure from the Board of Directors, with cash being paid in lieu of any fractional shares.

Director Compensation Paid in 2013

        The following table provides information regarding the compensation paid to our directors.

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        Directors that are employed by the Company are not (or, prior to the November 13, 2013 Exit Event (as defined below), those employed by the Former Equity Sponsors were not) entitled to receive any fees for serving as a member of our Board of Directors. Mr. Clingen serves as Chairman of the Board of Directors, which was also an executive officer position, during the last fiscal year and received a base salary and a cash bonus payment for that year solely resulting from holding such officer position. Mr. Clingen is not a named executive officer and did not receive any additional compensation for services provided as Chairman of the Board in 2013. Mr. Clingen's compensation in 2013 as an executive officer was approved by the Compensation Committee of the Board of Directors. Effective January 1, 2014, Mr. Clingen is no longer an executive officer of the Company and will no longer be eligible to receive a base salary and cash bonus and will instead be compensated as our non-executive Chairman solely through our director compensation program, as described above.

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Director Stock Ownership

        The following table sets forth information regarding the number of vested and unvested shares of our common stock held by each director who was not employed by the Company or one of our Former Equity Sponsors as of December 31, 2013:

Director Stock Ownership and Holding Guidelines

        The Company's non-employee directors are subject to the Company's stock ownership and holding guidelines, which require each non-employee director to hold any shares of the Company's common stock granted after January 1, 2014 for at least four years, subject to certain exceptions approved by the Compensation Committee.

Communications with the Board of Directors

        Any interested parties desiring to communicate with the Chairman of the Board of Directors or any of the independent directors regarding the Company may directly contact such directors by delivering such correspondence to the Company's General Counsel at KAR Auction Services, Inc., 13085 Hamilton Crossing Boulevard, Carmel, Indiana 46032.

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

Executive Sessions

        The independent directors of the Company meet in executive session at regularly scheduled Board of Directors meetings, if needed, and the members of the Audit Committee generally meet in executive session at each regularly scheduled, in person Audit Committee meeting. The Company's Corporate Governance Guidelines state that the Chairman of the Board of Directors, if an independent director, or the lead independent director shall preside at such executive sessions, or in such director's absence, another independent director designated by the Chairman of the Board of Directors or the lead independent director, as applicable, shall preside at such executive sessions. Our Chairman of the Board is not an independent director and we currently do not have a designated lead director. Until such time as the Board of Directors appoints a lead independent director, for all executive sessions of the non-employee or independent directors, the independent directors will rotate as the presiding director.

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ADVISORY VOTE TO APPROVE THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS

PROPOSAL NO. 2

        Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, the Board of Directors is providing our stockholders the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. As approved by its stockholders at the 2011 Annual Meeting and consistent with the Board of Directors' recommendation, the Company submits this proposal for a non-binding vote on executive compensation every three years. The next advisory vote to approve the compensation of our named executive officers is scheduled to occur at the 2017 Annual Meeting.

        As described in more detail under the heading "Executive Compensation—Compensation Discussion and Analysis," we believe that the compensation program for our named executive officers is designed to enhance stockholder value by (i) closely aligning compensation with our performance on both a short-term and long-term basis through the use of annual cash incentive awards and equity awards such as stock options and performance-based restricted stock unit awards; (ii) linking compensation to specific, measurable results; and (iii) attracting and retaining key executive talent in the vehicle remarketing and automotive finance industry. More specifically, we believe that each of the compensation programs that we have developed and implemented satisfies one or more of the following specific objectives:

•

motivate and focus our executive officers through incentive compensation programs directly tied to our financial results;



•

support a one-company culture and encourage synergies between all business units by aligning compensation with long-term overall Company performance and stockholder value;



•

provide a significant percentage of total compensation through variable pay based on pre-established goals and objectives;



•

enhance our ability to attract and retain skilled and experienced executive officers;



•

align the interests of our executive officers with the interests of our stockholders so that they manage from the perspective of owners with an equity stake in the Company; and



•

provide rewards commensurate with performance and with competitive market practices.

        For these reasons and the others described elsewhere in this proxy statement, the Board of Directors recommends approval of the following non-binding resolution:

        RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis section, the compensation tables and any related material disclosed in this proxy statement, is hereby APPROVED.

        The vote is an advisory vote only and is not binding on the Company or the Board of Directors. However, the Compensation Committee will consider, in its discretion, the result of the vote in future compensation decisions for the named executive officers.

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APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE KAR AUCTION SERVICES, INC. 2009 OMNIBUS STOCK AND INCENTIVE PLAN

PROPOSAL NO. 3

        We are asking our stockholders to approve the amendment and restatement of the Omnibus Plan, under which we are seeking the approval of additional shares. Approval of this proposal requires the affirmative vote of the majority of shares present in person or represented by proxy at the annual meeting and entitled to vote.

        The following description of the Omnibus Plan is qualified in its entirety by the full text of the Omnibus Plan, which is attached as Appendix A to this proxy statement. Capitalized terms used herein but not otherwise defined shall have the meaning assigned to such terms in the Omnibus Plan, unless the context clearly dictates otherwise.

Purpose

        The purpose of the Omnibus Plan is to provide an additional incentive to participants whose contributions are essential to the growth and success of our business, in order to strengthen the commitment of such persons to the Company, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in our long-term growth and profitability.

Description of the Amendments

        As described below, the Omnibus Plan would be amended to, among other things:

•

Add 6,000,000 shares of common stock to be available for issuance under the Omnibus Plan;



•

Extend the expiration date of the Omnibus Plan's term from December 10, 2019 to June 10, 2024;



•

Eliminate liberal share counting provisions for options and share appreciation rights ("SARs");



•

Clarify that the option and SAR repricing prohibitions also applies to the substitution of other awards for and cash buyouts of underwater options;



•

Grant the Committee the power to amend or terminate the Omnibus Plan;



•

Provide that all awards issued under the Omnibus Plan are subject to any compensation recoupment policy adopted by the Company; and



•

Clarify other provisions in the Omnibus Plan.

Eligible Participants

        The employees, directors and independent contractors and consultants of the Company and its affiliates who are chosen by the Committee are eligible to receive awards under the Omnibus Plan. As of March 31, 2014, there were approximately 12,282 employees, 13 directors and 450 independent contractors and consultants of the Company and its affiliates.

Available Shares and Award Limitations

        The aggregate awards granted during any calendar year to any single individual shall not exceed (i) 600,000 shares subject to options or SARs; (ii) 300,000 shares subject to restricted shares or other share-based awards; and (iii) $5,000,000 with respect to cash-based awards. Following the approval of this amendment and restatement of the Omnibus Plan, which seeks to add 6,000,000 shares, the number of shares of our common stock, in the aggregate, which may be issued pursuant to awards

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under the Omnibus Plan will be increased from 6,492,683 to 12,492,683. If the amendment and restatement of the Omnibus Plan is approved by stockholders, the 2,082,560 shares which remained available for issuance after February 28, 2014 would be increased to 8,082,560 shares that would be available for future issuance. Based on historic and projected usage patterns, we expect that, if this proposal is approved by stockholders, the shares under the Omnibus Plan will be exhausted for purposes of granting awards under the Omnibus Plan within the next three to four years. As of the close of the regular trading session on April 16, 2014, the Company's stock price was $30.18 per share.

        Our three year average adjusted equity plan burn rate for 2011 through 2013 was 0.64% under the model used by Institutional Shareholder Services (ISS), which treats each full value share awarded as equivalent to 2.5 option shares. In addition, our equity plan overhang (or potential dilution) as of February 28, 2014 (prior to our additional share request) was approximately 6.8% on a fully-diluted basis and with the additional requested shares, if approved, would be approximately 10.5%. We are defining and calculating equity plan overhang to be (i) the total of all shares subject to outstanding awards PLUS shares remaining available for future issuance, including any additional share requests, DIVIDED BY (ii) our total issued and outstanding shares PLUS the total of all shares subject to outstanding awards PLUS shares remaining available for future issuance, including any share requests.

Awards

        Under the Omnibus Plan, the Committee is authorized to grant stock options, SARs, restricted shares and other share-based awards or cash-based awards, each of which may be made subject to the achievement of specified Performance Goals established by the Committee.

        Stock Options.    Nonqualified stock options, which are not intended to qualify for special tax treatment under the Code, may be granted under the Omnibus Plan. The Committee is authorized to set the terms of an option, including exercise price and the time and method of exercise, but is prohibited from repricing options without stockholder approval. The exercise price applicable to option awards must be at least equal to the fair market value of a share of the Company's common stock on the applicable grant date, generally determined based on the closing sale price on the New York Stock Exchange on the grant date.

        SARs.    A SAR entitles the holder to receive an amount equal to the difference between the fair market value of a specified number of shares on the exercise date and the exercise price of the SAR set by the Committee as of the date of grant. The exercise price applicable to SAR awards must be at least equal to the fair market value of a share of the Company's common stock on the applicable grant date, generally determined based on the closing sale price on the New York Stock Exchange on the grant date. The Committee is authorized to set the terms of the SARs, including the time and method of exercise, but is prohibited from repricing SARs without stockholder approval.

        Restricted Shares.    Awards of restricted shares are subject to restrictions on transferability and such other restrictions, if any, as the Committee may impose on the date of grant or thereafter. Such restrictions may lapse under circumstances as the Committee may determine, such as completion of a specified period of continued employment or upon the achievement of performance criteria. Except as otherwise determined by the Committee, eligible participants, who are granted restricted shares will have all of the rights of a stockholder with respect to such restricted shares during any period of restriction.

        Other Share-Based Awards or Cash-Based Awards.    The Committee may also grant rights or other interests that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, our common stock, including, but not limited to, unrestricted shares, restricted stock units, dividend equivalents or performance units, each of which may be subject to the

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attainment of Performance Goals or a period of continued employment or other terms or conditions as permitted under the Omnibus Plan.

Performance Goals

        Awards under the Omnibus Plan to the chief executive officer and the three other most highly compensated officers other than the chief financial officer (the "Covered Employees") may be made subject to the attainment of Performance Goals relating to one or more of the following business criteria within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)"): (i) earnings, including one or more of operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, adjusted EBITDA, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items); (ii) pre-tax income or after-tax income; (iii) earnings per share (basic or diluted); (iv) operating profit; (v) revenue, revenue growth or rate of revenue growth; (vi) return on assets (gross or net), return on investment, return on capital, or return on equity; (vii) returns on sales or revenues; (viii) operating expenses; (ix) stock price appreciation (including total stockholder return, on an absolute basis or relative to a peer group or other index selected by the Committee); (x) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xi) implementation or completion of critical projects or processes; (xii) cumulative earnings per share growth; (xiii) operating margin or profit margin; (xiv) cost targets, reductions and savings, productivity and efficiencies; (xv) strategic business criteria, consisting of one or more objectively determinable objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (xvi) objectively determinable personal professional objectives, including any of the foregoing Performance Goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions; and (xvii) any combination of, or a specified increase in, any of the foregoing.

        Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company or affiliate thereof, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The Performance Goals may include a threshold level of performance below which no payment shall be made (or no vesting shall occur), levels of performance at which specified payments shall be made (or specified vesting shall occur), and a maximum level of performance above which no additional payment shall be made (or at which full vesting shall occur). Each of the foregoing Performance Goals shall be subject to certification by the Committee. The Committee has the authority to specify reasonable definitions for any Performance Goals it uses and the definitions may provide for equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any affiliate thereof or the financial statements of the Company or any affiliate thereof, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles (in each case, to the extent not inconsistent with Section 162(m), if applicable).

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Change in Control

        Upon the consummation of a Change in Control, unless otherwise determined by the Administrator or as otherwise specified in an award agreement, all outstanding awards granted under the Omnibus Plan (other than Other Cash-Based Awards granted pursuant to the Company's annual incentive plan or program) will fully vest and become exercisable. With respect to Other Cash-Based Awards granted pursuant to the Company's annual incentive plan or program, such awards shall be paid upon the consummation of a Change in Control and calculated based on the actual performance of the applicable performance goals through the date of the Change in Control, as determined by the Administrator in its discretion, prorated based on the number of days of the annual performance period that have elapsed prior to and including the date of the Change in Control.

Capital Structure Changes

        If the Administrator determines that a share dividend, special dividend (including cash dividends), recapitalization, share split, reverse split, reorganization, merger, consolidation, spin-off, repurchase, share exchange, or other similar corporate transaction affects the shares such that an adjustment is appropriate in order to prevent the dilution of the rights of participants, the Administrator may make such equitable changes as it deems appropriate.

Amendment and Termination

        The Omnibus Plan may be amended, suspended or terminated by the board of directors or the Committee. However, any amendment or modification for which stockholder approval is required will not be effective until such stockholder approval has been obtained. Except as described above in "Capital Structure Changes," the Administrator will not modify any outstanding stock option or SAR in order to specify a lower exercise price or grant price (and will not cancel a stock option or SAR and substitute for it a stock option or SAR with a lower exercise price or grant price), without the approval of the Company's stockholders. In addition, except as described above in "Capital Structure Changes," the Administrator may not cancel an outstanding stock option or SAR whose exercise price or grant price is equal to or greater than the current fair market value of a share and substitute for it another award or cash payment without the prior approval of the Company's stockholders.

Effective Date and Term

        The Omnibus Plan originally became effective on December 10, 2009 and, if the amendment and restatement thereof is approved by our stockholders, will be effective as of June 10, 2014 and will terminate as to future awards on June 10, 2024.

Incentive Compensation Recoupment Policy

        The Omnibus Plan and all awards issued thereunder will be subject to any compensation recoupment policy adopted by the Company to comply with applicable laws, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act.

U.S. Federal Income Tax Considerations

        The following is a brief description of the federal income tax treatment that generally apply to Omnibus Plan awards. The description is based on current federal tax laws, rules and regulations, which are subject to change, and does not purport to be a complete description of the federal income tax aspects of the Omnibus Plan. A participant may also be subject to state and local taxes.

        Nonqualified Stock Options.    The grant of a nonqualified stock option will not result in taxable income to the participant. The participant will realize ordinary income at the time of exercise in an

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amount equal to the excess, if any, of the then fair market value of the stock acquired over the exercise price for those shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains or losses, with the basis in such stock equal to the fair market value of the shares at the time of exercise.

        SARs.    The grant of a SAR will not result in taxable income to the participant at the time of the grant. The participant will realize ordinary income at the time of exercise in an amount equal to the amount of cash or the fair market value of the shares paid upon exercise, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of any shares received will be treated as capital gains or losses, with the basis in such stock equal to the fair market value of the shares at the time of exercise.

        Restricted Stock.    A grant of restricted stock will not result in taxable income to the participant at the time of grant, and we will not be entitled to a corresponding deduction, assuming that the shares are subject to transferability restrictions and that certain restrictions on the shares constitute a "substantial risk of forfeiture" for federal income tax purposes. Upon vesting, the holder will realize ordinary income in an amount equal to the then fair market value of the vested shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon subsequent disposition of such shares will be treated as capital gains or losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting. Dividends paid to the holder of restricted stock during the restricted period also will be compensation income to the participant, and we will be entitled to a corresponding deduction when the dividends no longer are subject to a substantial risk of forfeiture or become transferable. A participant may elect pursuant to Section 83(b) of the Code to have income recognized at the date a restricted stock award is granted and to have the applicable capital gain holding period commence as of that date. In such a case, we will be entitled to a corresponding deduction on the date of grant.

        Other Share-Based Awards—Restricted Stock Units and Performance Units.    A grant of restricted stock units or performance units will not result in taxable income to the participant at the time of grant, and we will not be entitled to a corresponding deduction. Upon vesting and issuance of the underlying shares, the holder will realize ordinary income in an amount equal to the then fair market value of the issued shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains or losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting and issuance. Dividend equivalents paid to the holder of restricted stock units during the restricted period also will be compensation income to the participant, and we will be entitled to a corresponding deduction when the dividend equivalents are paid. No election pursuant to Section 83(b) of the Code may be made with respect to restricted stock units and performance units.

        Other Share-Based Awards.    With respect to grants of other share-based awards (other than restricted stock units or performance units), upon payment of cash or the vesting or issuance of the underlying shares, the participant will realize ordinary income in an amount equal to the cash received or the then fair market value of the issued shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon subsequent disposition of such shares will be treated as capital gains or losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting and issuance.

        Other Cash-Based Awards.    A participant will have taxable compensation equal to the amount of the cash award on the date the award is vested and paid to the participant. The Company will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes.

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        Tax Withholding.    As a condition to the delivery of any shares to the recipient of an award, we may require the recipient to make arrangements for meeting certain tax withholding requirements in connection with the award.

        Section 162(m).    In general, Section 162(m) denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year per Covered Employee, subject to certain exceptions. The Omnibus Plan is designed to permit certain awards to be granted as performance compensation awards intended to qualify under the "performance-based compensation" exception to Section 162(m). The Committee generally will attempt to structure awards to preserve federal income tax deductions, but the Committee retains the discretion to approve awards that do not meet the "performance-based compensation" exception to Section 162(m).

        Code Section 409A.    The American Jobs Creation Act of 2004, enacted on October 22, 2004, revised the federal income tax law applicable to certain types of awards that may be granted under the Omnibus Plan. To the extent applicable, it is intended that the Omnibus Plan and any awards made under the Omnibus Plan either be exempt from, or, in the alternative, comply with the provisions of Code Section 409A, including the exceptions for stock rights and short-term deferrals. The Company intends to administer the Omnibus Plan and any awards made thereunder in a manner consistent with the requirements of Code Section 409A.

New Plan Benefits

        The Committee has established the 2014 Annual Incentive Program for the Company's executive officers as a cash-based award under the Omnibus Plan. No decisions have been made regarding the amount and type of other awards that are to be made under the Omnibus Plan to participants in the future. The following table sets forth certain information relating to the amount of the 2014 target bonus that would be payable under the cash-based award to the Company's named executive officers and executive officers and employees. No amounts have been included relating to other awards as the amounts of any such awards are not determinable at this time.

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Equity Compensation Plan Information

        The following table sets forth the aggregate information of our equity compensation plans in effect as of December 31, 2013.

Updated Equity Compensation Plan Information as of February 28, 2014

        As of February 28, 2014, there were 2,082,560 shares remaining available for future issuance under the Omnibus Plan and 8,061,653 shares subject to outstanding awards. Of the 8,061,653 shares subject to outstanding awards, 323,466 were full value awards and 7,738,187 were related to options, with a weighted average exercise price of $14.39 and a weighted average remaining term of 5.6 years.

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RATIFICATION OF INDEPENDENT AUDITORS

PROPOSAL NO. 4

Proposal

        The Audit Committee has appointed KPMG to serve as KAR Auction Services' independent registered public accounting firm for its fiscal year ending December 31, 2014. The Audit Committee and the Board of Directors seek to have the stockholders ratify the Audit Committee's appointment of KPMG, which has served as KAR Auction Services' independent registered public accounting firm since 2006. Although KAR Auction Services is not required to seek stockholder approval of this appointment, the Board of Directors believes it to be sound corporate governance to do so. If the appointment of KPMG is not ratified by the stockholders, the Audit Committee may appoint another independent registered public accounting firm or may decide to maintain its appointment of KPMG. Ratification of the appointment of our independent registered public accounting firm requires the affirmative vote of the majority of shares present in person or represented by proxy at the annual meeting and entitled to vote.

        Representatives of KPMG will be present at the annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.

Report of the Audit Committee

        The Audit Committee reviews the Company's financial reporting process on behalf of the Board of Directors. The Audit Committee consists of directors who have been determined by the Board of Directors to be independent of the Company as prescribed by the NYSE and other regulators. The Company's management has the primary responsibility for the financial statements and for the reporting process, including the establishment and maintenance of the system of internal control over financial reporting. The Company's independent registered public accounting firm is responsible for auditing the financial statements prepared by management, expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, and auditing the Company's internal control over financial reporting and expressing an opinion thereon. In this context, the Audit Committee has met and held discussions with management and KPMG, the Company's independent registered public accounting firm, regarding the fair and complete presentation of the Company's financial statements and the assessment of the Company's internal control over financial reporting.

        The Audit Committee has discussed with KPMG matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board (the "PCAOB") in Rule 3200T, and has reviewed and discussed KPMG's independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letter required by applicable requirements of the PCAOB regarding KPMG's communications with the Audit Committee concerning independence, and the Audit Committee has discussed KPMG's independence from the Company. The Audit Committee also has considered whether KPMG's provision of non-audit services to the Company is compatible with the auditor's independence. The Audit Committee has concluded that KPMG is independent from the Company and its management.

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        The Audit Committee meets with the Chief Financial Officer, the Vice President of Internal Audit and representatives of KPMG, in regular and executive sessions, to discuss the audited financial statements, the evaluations of the Company's internal controls and the overall quality of the Company's financial reporting and compliance programs.

        In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board of Directors has approved, that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, for filing with the SEC.

The Audit Committee
Robert M. Finlayson (Chairman)
Peter R. Formanek
Michael T. Kestner
Jonathan P. Ward

Fees Paid to KPMG

        The following table sets forth the aggregate fees charged to KAR Auction Services by KPMG for audit services rendered in connection with the audit of our consolidated financial statements and reports for 2013 and 2012 and for other services rendered during 2013 and 2012 to KAR Auction Services and its subsidiaries, as well as all out-of-pocket costs incurred in connection with these services:

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

        KAR Auction Services' independent auditor fee pre-approval policy provides for an annual process through which the Audit Committee evaluates the nature and scope of the audit prior to the commencement of the audit. The Audit Committee also evaluates audit-related, tax and other services

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that are proposed, along with the anticipated cost of such services. The Audit Committee reviews schedules of specific services to be provided. If other services are provided outside of this annual process, under the policy they may be (i) pre-approved by the Audit Committee at a regularly scheduled meeting; or (ii) by the Chairman of the Audit Committee, acting between meetings and reporting back to the Audit Committee at the next scheduled meeting. All audit, audit-related, tax services and all other fees described above were approved by the Audit Committee before such services were rendered.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview

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

        Named Executive Officers.    Our named executive officers for the last completed fiscal year were (i) our principal executive officer, or PEO; (ii) our principal financial officer, or PFO; and (iii) the three most highly compensated executive officers (other than the PEO and the PFO) who were serving as executive officers at the end of the last completed fiscal year. The following persons were our named executive officers for the period covered by this compensation discussion and analysis:

•

James Hallett, Chief Executive Officer (PEO) of KAR Auction Services;



•

Eric Loughmiller, Executive Vice President and Chief Financial Officer (PFO) of KAR Auction Services;



•

Rebecca Polak, Executive Vice President, General Counsel and Secretary of KAR Auction Services;



•

Thomas O'Brien, Chief Executive Officer of IAA; and



•

Thomas Caruso, Chief Client Officer of KAR Auction Services and former Chief Executive Officer and President of ADESA.

Executive Summary

        Despite the impact of Superstorm Sandy on our salvage auction business, KAR delivered solid growth in volume of total vehicles sold, revenues and Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and is defined and reconciled to the GAAP measure, net income (loss), in our Annual Report on Form 10-K for the year ended December 31, 2013 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—EBITDA and Adjusted EBITDA."

        Specific highlights for fiscal 2013 included:

•

Total vehicles sold for our ADESA and IAA business segments rose approximately 12% to 3.7 million units.



•

Net revenue was up 11% to more than $2.1 billion.



•

Adjusted EBITDA rose 8% to $538.2 million.



•

We reduced our leverage, as measured by Net Debt / Adjusted EBITDA, to 3.07X.



•

We increased our annual dividend from $0.76 to $1.00 per share.



•

Shares of KAR stock rose 46% to $29.55.

        During the past five years, and as we move forward following the sale by our former equity sponsors of all of their holdings of our common stock in 2013, we have maintained a compensation program structured to achieve a close connection between executive pay and company performance.

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•

Pay for Performance Alignment:  During the past 5 fiscal years, including in 2013, we have demonstrated close alignment between our total stockholder return (TSR) performance and the compensation of our Chief Executive Officers, as shown in the chart below.

5-Year Pay Alignment Chart

•

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



•

Independent Compensation Consultant:  In 2013, our compensation committee engaged ClearBridge as its independent compensation consultant.



•

Performance-Based Compensation Awards: The equity awards granted to our named executive officers in late 2013 and in 2014 are heavily performance-based, consisting of restricted stock units that vest based on achievement of relative TSR and adjusted earnings per share goals and stock options.



•

Incentive Compensation Recoupment Policy:  In 2014, we adopted a policy providing for the recovery of incentive compensation in the event we are required to prepare an accounting restatement due to any executive officer's intentional misconduct.



•

Anti-Hedging and Pledging of Company Stock Policy:  In addition to our existing anti-pledging of Company stock policy, we adopted a formal anti-hedging of Company stock policy in 2014, which applies to our executive officers and directors.

Compensation Philosophy and Objectives

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

•

motivate and focus our executive officers through incentive compensation programs directly tied to our financial results;

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•

support a one-company culture and encourage synergies among all business units by aligning rewards with long-term overall Company performance and stockholder value;



•

provide a significant percentage of total compensation through variable pay based on pre-established goals and objectives;



•

provide competitive upside opportunity without encouraging excessive risk-taking;



•

enhance our ability to attract and retain skilled and experienced executive officers;



•

align the interests of our executive officers with the interests of our stockholders so that they manage from the perspective of owners with an equity stake in the Company; and



•

provide rewards commensurate with performance and with competitive market practices.

The Role of the Compensation Committee and the Executive Officers in Determining Executive Compensation

        Composition of the Compensation Committee.    The Compensation Committee of our Board of Directors is comprised of Church M. Moore (Chairman), Donna R. Ecton and Peter R. Formanek. Mr. Moore was originally appointed by KAR LLC pursuant to a director designation agreement between KAR Auction Services and KAR LLC.

        Role of the Compensation Committee.    The Compensation Committee has primary responsibility for all compensation decisions relating to our named executive officers. The Compensation Committee reviews the aggregate level of our executive compensation, as well as the mix of elements used to compensate our named executive officers on an annual basis. In light of the unique mix of businesses that comprise KAR Auction Services and the lack of directly comparable public companies, the Compensation Committee has not identified a specific peer group of companies for comparative purposes and does not formally engage in benchmarking of compensation. During 2013, the Compensation Committee engaged ClearBridge as its independent compensation consultant to provide advice as discussed in the following paragraph.

        Role of the Independent Compensation Consultant.    In 2013, the Compensation Committee engaged ClearBridge to provide advice to the Compensation Committee with respect to evaluating the Company's long-term incentive compensation practices and designing new long-term equity awards and related compensation matters. The Compensation Committee has reviewed the independence of ClearBridge in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that ClearBridge's work for the Compensation Committee does not raise any conflict of interest. All work performed by ClearBridge is subject to review and approval of the Compensation Committee.

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

Elements Used to Achieve Compensation Philosophy and Objectives

        Components of Executive Compensation for 2013.    The Compensation Committee has established a total compensation and benefits program for our named executive officers that consist of the following:

•

base salary;

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•

annual incentive opportunity;



•

long-term incentive opportunity;



•

retirement, health and welfare benefits; and



•

limited perquisites and personal benefits.

Base Salary

        General.    Base salary is the fixed component of total annual cash compensation and is intended to reward the named executive officers for their past performance and facilitate the attraction and retention of a skilled and experienced executive management team. The Compensation Committee reviews base salaries for our named executive officers annually and as it deems necessary and appropriate in connection with any promotion or other change in responsibility of a named executive officer.

        Annual salary levels for our named executive officers are based upon various factors, including the individual's performance, budget guidelines, experience, business unit responsibilities, tenure in the particular position, other competitive market salaries for the particular position and the terms of any employment agreements with the named executive officers. In addition, the Compensation Committee also considers the amount and relative percentage of total compensation that is derived from base salary when setting the compensation of our executive officers. The Compensation Committee has not, however, established a policy or a specific formula for such purpose.

        In view of the wide variety of factors considered by the Compensation Committee in connection with determining the base salary of each of our named executive officers, the Compensation Committee has not attempted to rank or otherwise assign relative weights to the factors that it considers. The Compensation Committee considers all the factors as a whole in reaching its determination. The Compensation Committee collectively makes its determination with respect to base salaries based on the conclusions reached by its members, in light of the factors that each of them considered appropriate.

        Base Salaries for 2013.    At its February 20, 2013 meeting, the Compensation Committee reviewed the base salaries of each of our named executive officers for 2013. After considering multiple factors, including, without limitation, the performance of the Company and the contribution of each named executive officer, the Compensation Committee approved a 2% increase in the base salaries for Messrs. Hallett, Loughmiller, O'Brien and Caruso and Ms. Polak. The amount of the increase was consistent with the overall 2% merit increase pool established for the Company. The increases resulted in the following salaries, which were retroactive to January 1, 2013: Mr. Hallett—$832,320; Mr. Loughmiller—$433,857; Ms. Polak—$357,000; Mr. O'Brien—$511,801; and Mr. Caruso—$510,000 (until starting in his new role as Chief Client Officer on December 17, 2013, as described below).

        Base Salaries for 2014.    The Compensation Committee approved an 8.13% increase in Mr. Hallett's base salary, effective as of January 1, 2014, on December 10, 2013 based on its review of competitive market salaries for CEOs. On December 17, 2013, Mr. Caruso entered into a new employment agreement with the Company to serve as its Chief Client Officer, and pursuant to this agreement his base salary was adjusted, commensurate with his new role with the Company. At its February 7, 2014 meeting, the Compensation Committee reviewed the base salaries of each of our other named executive officers for 2013. After considering multiple factors, including, without limitation, the performance of the Company and the contribution of each named executive officer, the Compensation Committee approved a 2% increase in the base salaries for Messrs. Loughmiller and O'Brien and Ms. Polak, effective retroactive to January 1, 2014. The amount of the increase was consistent with the overall 2% merit increase pool established for the Company. These base salary

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adjustments resulted in the following salaries for 2014: Mr. Hallett—$900,000; Mr. Loughmiller—$442,534; Ms. Polak—$364,140; Mr. O'Brien—$522,037; and Mr. Caruso—$425,000.

Annual Cash Incentive Programs

        General.    We provide annual cash incentive opportunities to our named executive officers in order to:

•

align annual incentives with overall Company financial results;



•

align annual incentives, where appropriate, with business unit or division financial results; and



•

align the interests of our executives with the interests of our stockholders.

        Annual cash incentive opportunities are established for each named executive officer by the Compensation Committee based upon a number of factors, including the job responsibilities of such executive and internal equity among the named executive officers. Consistent with our compensation philosophy and objectives, the Compensation Committee sets annual incentive bonus targets in amounts which are intended to encourage the achievement of certain levels of performance, provide competitive upside opportunity without encouraging excessive risk-taking and provide a significant portion of each named executive officer's compensation through variable pay based upon pre-established goals and objectives. Generally, named executive officers with greater job responsibilities have a significant proportion of their annual cash compensation tied to Company performance through their annual incentive opportunity. The Compensation Committee has not, however, established a policy or a formula for the purpose of calculating the specific amount or relative percentage of total compensation that should be derived from annual cash incentive opportunities.

        The KAR Auction Services, Inc. Annual Incentive Program.    The KAR Auction Services, Inc. Annual Incentive Program (the "Annual Incentive Program"), which is part of the Omnibus Plan, was adopted for the purpose of motivating and rewarding the successful achievement of pre-determined financial objectives at KAR Auction Services and its subsidiaries. Under such program, the grant of cash-based awards to eligible participants is contingent upon the achievement of certain corporate performance goals as determined by the Compensation Committee.

Use of Adjusted EBITDA

        In 2013, the Compensation Committee used "Adjusted EBITDA" (as defined below and in the Company's senior credit agreement, for KAR Auction Services, ADESA and IAA, depending upon the named executive officer) as the measure of performance when establishing annual performance objectives for the named executive officers. Using these measures, the Compensation Committee establishes, on an annual basis, specific targets that determine the size of payouts under the incentive plan. In 2013, the annual incentive opportunity for each named executive officer other than Messrs. Hallett and Loughmiller and Ms. Polak, was based upon a combination of the performance of the Company overall and the performance of the executive's business unit. Mr. Hallett's, Mr. Loughmiller's and Ms. Polak's annual incentive opportunity was based solely upon the performance of KAR Auction Services. Mr. O'Brien's annual incentive opportunity was based on the performance of IAA and KAR Auction Services. Mr. Caruso's annual incentive opportunity was based on the performance of ADESA and KAR Auction Services.

Adjusted EBITDA Defined

        "Adjusted EBITDA" is equal to EBITDA (earnings before interest expense, income taxes, depreciation and amortization) adjusted to exclude, among other things: (a) gains and losses from asset sales; (b) unrealized foreign currency translation gains and losses in respect of indebtedness; (c) certain non-recurring gains and losses; (d) stock option expense; (e) certain other noncash amounts included in

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the determination of net income; (f) charges and revenue reductions resulting from purchase accounting; (g) unrealized gains and losses on hedge agreements; (h) minority interest; (i) expenses associated with the consolidation of salvage operations; (j) consulting expenses incurred for cost reduction, operating restructuring and business improvement efforts; (k) expenses realized upon the termination of employees and the termination or cancellation of leases, software licenses or other contracts in connection with the operational restructuring and business improvement efforts; (l) expenses incurred in connection with permitted acquisitions; (m) any impairment charges or write-offs of intangibles; and (n) any extraordinary, unusual or nonrecurring charges, expenses or losses. Adjusted EBITDA with respect to our operating business units, ADESA and IAA, is determined in a similar manner, however, it excludes "holding company" expenses as disclosed in our Annual Report on Form 10-K.

Performance Targets for the Annual Incentive Program

        The Compensation Committee analyzes financial measures and determines the level of performance required to receive threshold, target and superior annual incentive payouts. The Compensation Committee established the performance objectives in amounts which it believed would be achievable given a sustained effort on the part of the named executive officers and which would require increasingly greater effort to achieve the target and superior objectives. The Compensation Committee may increase or decrease the performance targets and the potential payouts at each performance target if, in the discretion of the Compensation Committee, the circumstances warrant such an adjustment.

2013 PERFORMANCE TARGETS

        The chart which follows provides the Adjusted EBITDA performance targets established by the Compensation Committee for 2013 as well as the actual level of performance achieved (dollars in millions):

2013 ANNUAL INCENTIVE OPPORTUNITIES

        Under the Annual Incentive Program, threshold performance objectives must be met in order for any payout to occur. Payouts can range from 50% of target awards for performance at threshold up to a maximum of 150% of target awards for superior performance or no payout if performance is below

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threshold. The following table shows the annual incentive opportunities for our named executive officers for 2013:

        Because KAR Auction Services, ADESA and IAA each achieved at least the threshold level of performance, each of our named executive officers were eligible to receive an award under the Annual Incentive Program for 2013. The respective award amounts are set forth in the Summary Compensation Table.

2014 ANNUAL INCENTIVE OPPORTUNITIES

        The following table shows the annual incentive opportunities for our named executive officers for 2014:

Long-Term Incentive Opportunities

        The Company provides long-term incentive compensation opportunities in the form of performance-based restricted stock units ("PRSUs"), performance-based stock options and service-based stock options, as described below.

        Recent Long-Term Incentive Awards.    Following the Exit Event (as defined in "KAR LLC Override Units" below) on November 13, 2013, the Compensation Committee has provided long-term incentive compensation opportunities in the form of PRSUs and service-based stock options.

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2013 Performance-Based RSU Awards

        On December 13, 2013, the Compensation Committee approved the grant of PRSUs to certain of the Company's named executive officers, as disclosed in the table below.

        The awards were designed to drive and reward long-term, sustainable stockholder value creation, achieve the Company's retention goals and to reflect the individuals' role, responsibility and contribution to the Company's success. The PRSUs vest on the third anniversary of the grant date if and to the extent that the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds certain levels over the three-year period beginning on the grant date. The amount of the target PRSUs earned and paid (on a 1-for-1 basis) in shares of common stock in a lump sum following the performance period will be: 0% for below threshold performance, 50% for threshold performance, 100% for target performance and up to 200% for achieving the maximum performance level. Linear interpolation will be used to calculate the percentage of target PRSUs earned and paid (on a 1-for-1 basis) if performance falls between the threshold and maximum levels. A summary of the relative total stockholder return levels and corresponding payouts is provided in the following table:

2014 Long-Term Incentive Awards

        On February 27, 2014, the Compensation Committee approved the grant of PRSUs and stock options under its long-term incentive program to certain of the Company's executive officers, including Messrs. Hallett and Loughmiller and Ms. Polak. The awards were designed so that each participating executive received approximately 50% of the total award value in the form of stock options and 50% in the form of PRSUs. Mr. Hallett received an option to purchase 194,404 shares of common stock of the Company and a total target amount of 43,832 PRSUs, Mr. Loughmiller received an option to purchase 97,204 shares of common stock of the Company and a total target amount of 21,916 PRSUs and Ms. Polak received an option to purchase 34,996 shares of common stock of the Company and a total target amount of 7,890 PRSUs.

        The stock options have an exercise price of $30.89 per share and will vest in equal 25% increments on the first four anniversaries of the grant date, subject to the executive's continued employment with the Company on such dates. Fifty percent of the PRSUs will vest on the third anniversary of the grant date if and to the extent that the Company's total stockholder return relative to that of companies within the S&P 500 Index exceeds the same levels described above over the three-year period beginning on the grant date. The remaining 50% of the PRSUs will vest if and to the extent that the Company's Cumulative Adjusted Net Income Per Share exceeds certain levels over the three-year period beginning on January 1, 2014. The amount of the target PRSUs earned and paid (on a 1-for-1 basis) in shares of

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common stock in a lump sum following the performance period will be: 0% for below threshold performance, 50% for threshold performance, 100% for target performance and up to 200% for achieving the maximum performance level. Linear interpolation will be used to calculate the percentage of target PRSUs earned and paid (on a 1-for-1 basis) if performance falls between the threshold and maximum levels.

        Legacy Long-Term Incentive Awards.    Certain service options and performance-based exit options were granted to our named executive officers prior to our Exit Event under the KAR Auction Services, Inc. Stock Incentive Plan ("Stock Incentive Plan"), which was in effect prior to our initial public offering, and later under the Omnibus Plan, which was adopted on December 10, 2009.

        Grants under the Stock Incentive Plan and the March 1, 2010 grant under the Omnibus Plan were structured as follows: (i) one-fourth of the total amount of each option grant to our named executive officers were service options, which vest in four equal annual installments on each of the first four anniversaries of the grant date and continue to function as an employee retention tool after vesting by rewarding continued service; and (ii) the remaining three-fourths of the amount of each option grant were performance-based exit options, which reward employees' efforts toward increasing the value of the Company and also serve as a retention tool because grantees generally are required to remain employed to benefit from the increase in the value of the Company. Grants after March 1, 2010 and prior to our Exit Event were 100% service options. Together, these awards aligned the interests of our named executive officers and other employees with the interests of our stockholders, who benefited from both the retention of a skilled management team and an increase in the value of the Company.

Performance-Based Vesting