THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

ADESA, Inc. (KAR)

4/7/2006 Proxy Information

Sean Hallett, the son of James P. Hallett, a former Executive Vice President of ADESA, and wholesale vehicle businesses which Sean Hallett owns or controls are in default on obligations owed to Automotive Finance Corporation ("AFC"), a wholly-owned subsidiary of ADESA, totaling $1.7 million at December 31, 2005. The amounts owed relate to three separate lines of credit with AFC and an outstanding loan. The lines of credit, totaling $0.4 million, which are secured with a perfected blanket security interest in the assets of the wholesale vehicle businesses have been closed. The loan is cross-collateralized with one of the credit lines and is secured by certain unencumbered personal property valued between $0.3 million and $0.5 million. Based on an assessment of recoverability, ADESA recorded provisions for credit losses totaling $1.3 million in 2004 leaving AFC with a net receivable position of $0.4 million at December 31, 2005 and December 31, 2004.

In November 2004, AFC and Automotive Finance Canada, Inc. ("AFCI") initiated legal action and filed a statement of claim in the Ontario Superior Court of Justice in November 2004 alleging that Sean Hallett and his related companies (the "Hallett Entities") had defaulted on their outstanding obligations to AFC and AFCI (Ontario Superior Court of Justice; Case File No. 04-CV-278564CM2). In December 2004, the Hallett Entities filed their statement of defense and counterclaim against AFC, AFCI, ADESA, Inc., ADESA Canada and ADESA Auctions Canada (collectively the "AFC Entities") stating that the Hallett Entities had satisfied their debts to the AFC Entities and alleging that the AFC Entities owed approximately $6 million to Hallett in compensatory and punitive damages.

In February 2005, the AFC Entities filed their reply and defense to counterclaim denying the claims made by the Hallett Entities and reaffirming the allegations made in the Statement of Claim, and the Hallett Entities filed a reply to defense to counterclaim denying the allegations in the AFC Entities' reply and defense to counterclaim and reaffirming the claims and allegations in their statement of defense and counterclaim. The litigation is currently in discovery.

4/11/2005 Proxy Information

Relationships with ALLETE

Distribution of Stock Dividend by ALLETE. On September 20, 2004, ADESA's majority stockholder, ALLETE, completed the distribution of a stock dividend to all ALLETE stockholders. All ADESA shares previously owned by ALLETE were distributed. One share of ADESA common stock was distributed to stockholders of record as of September 13, 2004 for each share of ALLETE common stock outstanding, resulting in a total distribution of 88.6 million shares of ADESA. The distribution was structured to qualify as a tax-free stock dividend to ALLETE stockholders.

Prior to September 20, 2004, ALLETE provided certain services, including accounting, treasury, tax, legal, public affairs, executive oversight, human resources, as well as other corporate services. ALLETE made certain allocations for its costs related to such services provided to ADESA. These cost allocations were determined on a proportionate cost basis that both ADESA and ALLETE considered to be reasonable reflections of the cost of services provided by ALLETE. These services accounted for approximately $2.2 million of expense for the period January 1 through September 20, 2004. ADESA also paid ALLETE approximately $0.5 million in the fourth quarter of 2004 for services provided by ALLETE.

Payment of Dividends and Debt by ADESA. In 2004, ADESA paid ALLETE aggregate dividends of $117.5 million and repaid ALLETE $136.1 million for intercompany debt owed by ADESA to ALLETE.

Agreements with ALLETE. In connection with the initial public offering of ADESA, ALLETE and ADESA delivered agreements governing various interim and ongoing relationships. These agreements included a master separation agreement, a tax sharing agreement, an employee and director matters agreement and a joint aircraft ownership and management agreement.

Master Separation Agreement. ADESA and ALLETE entered into a master separation agreement which contained the key provisions relating to the separation of ADESA's business from ALLETE and the subsequent spin-off by ALLETE to its stockholders of the remaining shares of ADESA's common stock.

Tax Sharing Agreement. ADESA and ALLETE entered into a tax sharing agreement, effective on the date of the spin-off, which governs ALLETE's and ADESA's respective rights, responsibilities and obligations after the spin-off with respect to taxes. Under the tax sharing agreement, ADESA will indemnify ALLETE for tax liabilities that are allocated to ADESA for periods prior to the spin-off. The amount of taxes allocated to ADESA for such periods is the amount that ADESA and its subsidiaries would have been required to pay under the previous agreements in place with ALLETE, determined in accordance with past practice, which generally is equal to the federal income or state income or franchise taxes that would have been payable by ADESA during such periods if ADESA had filed separate consolidated or combined returns with its own subsidiaries.

ADESA has agreed in this tax sharing agreement that ADESA will indemnify ALLETE for any taxes arising out of the failure of the spin-off to qualify as tax-free distribution to ALLETE and the ALLETE stockholders as a result of ADESA's actions or inaction, and 50% of any such taxes that do not result from the actions or inaction of either ADESA or ALLETE. ADESA will share with ALLETE the right to control the disposition of any audits, litigation or other controversies with any taxing authorities regarding such taxes.

Employee and Director Matters Agreement. ADESA entered into an employee and director matters agreement with ALLETE that governs the allocation of responsibilities related to employee benefit plans provided by ALLETE to ADESA's employees and directors and the allocation of liability relating to employees and directors of ALLETE and ADESA in connection with the initial public offering and the subsequent spin-off by ALLETE. In general, ALLETE is responsible for all liabilities relating to employees and directors of ALLETE, and ADESA will be responsible for all liabilities relating to its employees and directors as of the date of the initial public offering. The agreement also addresses treatment of liabilities in respect of those ALLETE employees and directors that have become employees and directors of ADESA. Under the agreement, ADESA's employees ceased to participate in any ALLETE pension plan as of the date of the initial public offering and ceased to participate in any ALLETE equity plan, including the employee stock purchase plan, as of the date of the spin-off. Any transferring employees and directors received credit under each of ADESA's applicable benefit plans for past service with ALLETE. The agreement also sets forth the treatment of ALLETE stock options and performance shares held by employees and directors of ALLETE and ADESA as of the time of the spin-off.

Joint Aircraft Ownership and Management Agreement. ADESA entered into a joint aircraft ownership and management agreement with ALLETE that allocates use of and responsibilities with regard to the two aircraft previously owned by ALLETE. Subsequent to the spin-off, ALLETE contributed 70% ownership interest in the aircraft to ADESA. ALLETE continues to undertake the duties of managing and scheduling the aircraft in exchange for a management fee equal to 3.5% of the total operating costs and expenses associated with the aircraft from the preceding quarter. The agreement will terminate upon withdrawal of one of the owners or the loss of one or both of the aircraft. Each owner will be entitled to 100% ownership interest in, and title to, one of the aircraft upon termination of the agreement.

Total non-cash capital contributions from ALLETE were $6.2 million for the year ended December 31, 2004. The amount contributed from ALLETE in 2004 includes the 70% ownership interest in two aircraft previously owned by ALLETE.

Other Related Party Matter

Wholesale vehicle businesses owned by Sean Hallett, the son of James P. Hallett, an executive vice president of ADESA, had three separate lines of credit with a wholly-owned subsidiary of ADESA, Automotive Finance Corporation ("AFC"), and an outstanding loan through a related entity. As of December 31, 2004, the total amount owed to AFC was $1.7 million. The lines of credit totaling $0.4 million are secured with a perfected blanket security interest in the assets of the wholesale vehicle businesses. The loan is cross-collateralized with one of the credit lines and is secured by certain unencumbered personal property valued up to approximately $0.5 million. As of December 31, 2004, Sean Hallett and his related businesses were in default on these obligations. Based on an assessment of recoverability, ADESA recorded provisions for credit losses totaling $0.8 million during the second half of 2004 related to the $1.7 million outstanding. All three credit lines have been closed. AFC had gross receivables from this individual's wholesale vehicle business totaling $0.9 million at December 31, 2004.

ADESA is pursuing legal action related to collection of these amounts. AFC and a wholly-owned subsidiary of AFC, Automotive Finance Canada, Inc. (together, the "AFC Entities"), filed their Statement of Claim in the Ontario Superior Court of Justice on or about November 8, 2004 wherein it was alleged that Sean Hallett and his related companies (the "Hallett Entities") had defaulted on their outstanding obligations to AFC. On or about December 15, 2004, Mr. Hallett filed his Statement of Defense and Counterclaim against the AFC Entities, ADESA, ADESA Canada and ADESA Auctions Canada alleging that there was no outstanding obligation and that the named counterclaim defendants owed approximately $6 million to Mr. Hallett in compensatory and punitive damages.

On or about February 1, 2005, the AFC Entities filed their Reply and Defense to Counterclaim denying the claims made by the Hallett Entities and reaffirming the allegations made in the Statement of Claim. On or about February 17, 2005, the Hallett Entities filed a Reply to Defense to Counterclaim essentially denying the allegations in the AFC Entities' Reply and Defense to Counterclaim and reaffirming the claims and allegations in their Statement of Defense and Counterclaim.

On March 4, 2005, the parties met in Toronto, Canada and participated in a mandatory mediation session in an effort to resolve the litigation. Subsequent to March 4, 2005, the parties, working through the mediator, have had further discussions in pursuit of resolving the litigation. The AFC Entities continue to prosecute their claims against the Hallett Entities.

6/11/2004 S-1/A

RELATIONSHIPS BETWEEN OUR COMPANY AND ALLETE

HISTORICAL RELATIONSHIP WITH ALLETE

We have been a wholly-owned subsidiary of ALLETE since 1996. As a result, in the ordinary course of our business, we have received various services provided by ALLETE, including accounting, treasury, tax, legal, public affairs, executive oversight and human resources, as well as other corporate services. ALLETE has also provided us with the services of a number of its executives and employees. Our historical financial statements include allocations to us by ALLETE of its costs related to these services. These cost allocations have been determined on a basis that we and ALLETE consider to be reasonable reflections of the use of services provided or the benefit received by us. These allocations totaled $3.3 million in 2003, $2.6 million in 2002 and $1.8 million in 2001.

For additional information about our relationship with ALLETE, see Note 11 to our Consolidated Financial Statements included elsewhere in this prospectus.

ALLETE AS OUR CONTROLLING STOCKHOLDER

Immediately prior to this offering, ALLETE, through a wholly-owned subsidiary, will be our sole stockholder. Upon completion of this offering, ALLETE will continue to own approximately 93.4% (or approximately 92.5% if the underwriters exercise their over-allotment option in full) of the outstanding shares of our common stock. For as long as ALLETE continues to beneficially own 50% or more of the outstanding shares of our common stock, ALLETE will be able to direct the election of all of the members of our board of directors and exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations involving our company, the acquisition or disposition of assets by our company, the incurrence of indebtedness by our company, the issuance of any additional common stock or other equity securities, and the payment of dividends with respect to our common stock. Similarly, ALLETE will have the power to determine matters submitted to a vote of our stockholders without the consent of our other stockholders, will have the power to prevent a change in control of our company and will have the power to take other actions that might be favorable to ALLETE.

ALLETE has announced that, following this offering, it intends to distribute its remaining equity interest in us to its stockholders in a transaction intended to be tax-free to ALLETE and its United States stockholders. We refer to this transaction as the "spin-off" or "distribution." The spin-off will be subject to a number of conditions, including the receipt by ALLETE of a favorable tax opinion from counsel that its distribution of its shares of ADESA to ALLETE stockholders qualifies as a tax-free spin-off under Section 355 of the Internal Revenue Code and will be tax-free to ALLETE and its United States stockholders. The spin-off will also be subject to other closing conditions some of which are more fully described below under "—Agreements between us and ALLETE—Master separation and distribution agreement." ALLETE has advised us that, while the spin-off may occur sooner, the four month time frame is necessary to satisfy the closing conditions of the spin-off. Although ALLETE has not undertaken any binding commitment to effect the spin-off, we are not aware of any circumstances under which ALLETE will not effect the spin-off if all of these conditions are satisfied. While ALLETE expects the spin-off to occur within four months after this offering it may not occur in that time period or at all, and ALLETE may, in its sole discretion, change the terms of the spin-off or decide not to complete the spin-off. If the spin-off does not occur, the risks relating to ALLETE's control of us, our directors' conflicts of interest, and the potential business conflicts of interest between ALLETE and us will continue to be relevant to our stockholders. For a further discussion of these risks, see "Risk factors—Risks relating to our relationship with and separation from ALLETE—If ALLETE does not complete the spin-off, we will continue to be controlled by ALLETE."

AGREEMENTS BETWEEN US AND ALLETE

This section describes the material provisions of agreements between us and ALLETE relating to this offering and our relationship after this offering. The description of the agreements is not complete and, with respect to each material agreement, is qualified by reference to the terms of the agreement, which has been filed as an exhibit to the registration statement of which this prospectus is a part. We encourage you to read the full text of these material agreements. We have entered or will enter into these agreements with ALLETE in the context of our relationship as a wholly-owned subsidiary of ALLETE. The prices and other terms of these agreements may be less favorable to us than those we could have obtained in arm's length negotiations with unaffiliated third parties for similar services or under similar agreements.

Administrative and general services agreement

We and ALLETE entered into an administrative and general services agreement, dated as of April 4, 1996, under which ALLETE agreed to render to us administrative services, including payroll, accounts payable, auditing, general record keeping, financial reporting, investment management, tax, legal, financial, managerial and other similar services. We expect that the administrative and general services agreement will terminate upon the spin-off. After such time we will need to provide our own administrative services or contract with a third party to provide such services for us.

Agreements relating to our separation from ALLETE

In connection with this offering ALLETE and we will deliver agreements governing various interim and ongoing relationships between us. These agreements will include:

–> a master separation agreement;

–> a tax sharing agreement;

–> an employee and director matters agreement; and

–>a joint aircraft ownership and management agreement.

Master separation agreement

The master separation agreement contains the key provisions relating to the separation of our business from ALLETE and the subsequent spin-off by ALLETE to its stockholders of the remaining shares of our common stock that it will hold after this offering. Pursuant to the master separation agreement, ALLETE will determine whether or not to proceed with all or part of the subsequent spin-off of our common stock, the date of the consummation and all related terms, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the spin-off and the timing of, and conditions to, the consummation of the spin-off. We have agreed to take all actions reasonably requested by ALLETE to facilitate the spin-off.

Provided that all events required prior to effectiveness have occurred, the effective date of the master separation agreement will be the earlier of (i) the completion of our initial public offering and (ii) the earliest date of the completion of (x) the offer and sale of $125 million aggregate principal amount of our % senior subordinated notes due 2012 and (y) our new $525 million credit facility. The master separation agreement may be terminated by ALLETE, without our approval, at any time prior to the later of our initial public offering or the last day of the completion of any of the transactions contemplated by our senior subordinated notes offering and the new credit facility. The master separation agreement may be terminated at any time after such date by mutual consent of ALLETE and us, and the agreement may be amended only with the mutual consent of ALLETE and us.

Certain events are required to have occurred on or before the effective date of the master separation agreement. In general, these events include:

–> the execution of all ancillary agreements,

–> the resignations of certain overlapping directors and officers between ALLETE and us,

–> the registration statement of which this prospectus forms a part must be effective and no stop-order may be in effect with respect to the registration statement,

–> our common stock must be approved for listing on the New York Stock Exchange,

–> the execution of the underwriting agreement by the underwriter and us,

–> ALLETE must be satisfied that it will own at least 80.1% of our outstanding capital stock immediately following the offering,

–> state securities and blue sky laws must have been satisfied and

–> an absence of any legal restraints, if not already fully satisfied. In addition, we must complete, before, or concurrently with, the issuance of our % senior subordinated notes due 2012 and the closing of our new credit facility, transactions such as:

–> the repayment of all borrowings under the Amended and Restated Credit Agreement dated as of July 25, 2003 between Bank One, N.A. and us,

–> payment of a $100 million dividend by us to ALLETE,

–> repayment of approximately $125 million of our outstanding debt,

–> repayment of all intercompany debt owed by us to ALLETE, and

–> the provision of notices of our intention to prepay approximately $73 million of our outstanding debt under certain synthetic leases.

The master separation agreement also requires us to exchange information with ALLETE, follow certain accounting practices, not take any action that would jeopardize ALLETE's ownership of over 80% of our outstanding capital stock at any time prior to ALLETE's distribution of our common stock and resolve disputes in a particular manner. We have also agreed to maintain the confidentiality of certain information, preserve available legal privileges, and conduct our business, prior to any distribution by ALLETE, in the ordinary course and consistent with past practice. Additionally, we have agreed to use our commercially reasonable best efforts to effect up to three demand registrations under the applicable federal and state securities laws of the shares of our common stock held by ALLETE, if requested by ALLETE. ALLETE may request no more than one demand registration in any calendar year. We have also granted ALLETE the right to include its shares of our common stock in an unlimited number of other registrations of our common equity securities initiated by us or on behalf of our other stockholders.

Tax sharing agreement

We and ALLETE will enter into a tax sharing agreement, effective on the date of the spin-off, which governs ALLETE's and our respective rights, responsibilities and obligations after the spin-off with respect to taxes. Under the tax sharing agreement, we will indemnify ALLETE for tax liabilities that are allocated to us for periods prior to the spin-off. The amount of taxes allocated to us for such periods is the amount that we and our subsidiaries would be required to pay under the agreements currently in place with ALLETE, determined in accordance with past practice, which generally is equal to the federal income or state income or franchise taxes that would have been payable by us during such periods if we had filed separate consolidated or combined returns with our own subsidiaries.

We have agreed in this tax sharing agreement that we will indemnify ALLETE for any taxes arising out of the failure of the spin-off to qualify as tax-free to ALLETE and the ALLETE shareholders as a result of our actions or inaction, and 50% of any such taxes that do not result from the action or inaction of either us or ALLETE. We will share with ALLETE the right to control the disposition of any audits, litigation or other controversies with any taxing authorities regarding such taxes.

Employee and director matters agreement

We will enter into an employee and director matters agreement with ALLETE that will govern the allocation of responsibilities related to employee benefit plans provided by ALLETE to our employees and directors and the allocation of liability relating to employees and directors of ALLETE and ADESA in connection with this offering and the subsequent spin-off by ALLETE. In general, ALLETE will be responsible for all liabilities relating to employees and directors of ALLETE, and we will be responsible for all liabilities relating to our employees and directors as of the date of this offering. The agreement also addresses treatment of liabilities in respect of those ALLETE employees and directors that will or have already become our employees and directors. Under the agreement, our employees will cease to participate in any ALLETE pension plan as of the date of this offering and will cease to participate in any ALLETE equity plan, including the employee stock purchase plan, as of the date of the spin-off. Any transferring employees and directors will receive credit under each of our applicable benefit plans for past service with ALLETE. The agreement also sets forth the treatment of ALLETE stock options and performance shares held by ALLETE's and our employees and directors as of the time of the spin-off. For a more complete description of the treatment of ALLETE stock options and performance shares, see "Management—Treatment of outstanding ALLETE stock options" and "Management—Treatment of performance shares."

Joint aircraft ownership and management agreement

We will enter into a joint aircraft ownership and management agreement with ALLETE that will allocate use of and responsibilities with regard to the two aircraft currently owned by ALLETE. Following the spin-off, we will hold a 70% ownership interest in the aircraft. ALLETE will continue to undertake the duties of managing and scheduling the aircraft in exchange for a management fee equal to 3.5% of the total operating costs and expenses associated with the aircraft from the preceding quarter.

OTHER RELATED TRANSACTIONS

Sean Hallett

Sean Hallett is the son of James Hallett, one of our executive vice presidents and the president and chief operating officer of ADESA Corporation, LLC. Sean Hallett has, through affiliated entities, three separate floorplanning lines of credit with AFC and AFC's wholly owned subsidiary, Automotive Finance Canada, Inc., denominated in United States and Canadian dollars, respectively. AFC secures these lines with a perfected blanket security interest in the assets of those entities. AFC's transactions with Sean Hallett have been the result of arm's length negotiations. For purchases in the United States, Sean Hallett has a US$500,000 line of credit for the entity known as Mapleleaf Remarketing. For purchases in Canada, Sean Hallett has a Cdn$3 million line for credit for Canadian Fleet Solutions and a Cdn$2 million line of credit for Erinwood Ford Sales. Canadian Fleet also has an outstanding Cdn$500,000 capital expense loan with AFC. The capital expense loan is cross-collateralized with the Canadian Fleet loan and is also secured by an unencumbered boat valued at approximately US$1.5 million. As of March 31, 2004, the collective amount owed under these lines of credit and loans was US$2.9 million. From time to time, the entities affiliated with Sean Hallett may also purchase or sell vehicles through our auctions. The total fees earned by us from these auction transactions was less than US$100,000 in 2003.