DEF 14A of LKQ Corp, Mar 22, 2024

DEF 14A of LKQ Corp

Filed Mar 22, 2024 · FY20230001065696-24-000069

Open on EDGAR

  1. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION

  2. Director Compensation Table

    Director Compensation Table The following table provides compensation information for the one-year period ended December 31, 2023 for each of our directors that served during 2023 (other than Mr. Zarcone whose compensation for his service as an employee is discussed under "Executive Compensation--Compensation Discussion and Analysis" and "Executive Compensation--Compensation Tables").

  3. Director Compensation Table

    | Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Total | | Patrick Berard (3) | $123,226 | $164,998 | $288,224 | | Meg A. Divitto (3) | $132,903 | $164,998 | $297,901 | | Robert M. Hanser (4) | $46,129 | $— | $46,129 | | Joseph M. Holsten (3) | $113,226 | $164,998 | $278,224 | | Blythe J. McGarvie (3) | $153,226 | $164,998 | $318,224 | | John W. Mendel (5) | $148,226 | $164,998 | $313,224 | | Jody G. Miller (5) (6) | $136,452 | $164,998 | $301,450 | | Guhan Subramanian (5) | $103,226 | $350,000 | $453,226 | | Xavier Urbain (3) | $128,226 | $164,998 | $293,224 | | Jacob Welch (7) | $44,355 | $— | $44,355 |

  4. Director Compensation Table

    (1) The amounts represent cash compensation, which is blended based on the director compensation program in effect prior to the 2023 Annual Meeting and the director compensation program in effect following the 2023 Annual Meeting; however for Ms. Miller, her fees were deferred into deferred RSUs according to her election pursuant to the voluntary deferred compensation plan for non-employee directors. (2) The amounts represent the aggregate grant date fair value of awards granted in 2023, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, “Compensation-Stock Compensation” (“FASB ASC Topic 718”) excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the volume-weighted average price of underlying shares on the date of grant by the number of awards granted. (3) As of December 31, 2023, the following non-employee directors held the following outstanding equity awards: Mr. Berard, 2,887 RSUs; Ms. Divitto, 2,887 RSUs; Mr. Holsten, 2,887 RSUs; Ms. McGarvie, 2,887 RSUs; and Mr. Urbain, 2,887 RSUs. (4) Mr. Hanser served on the Board of Directors until May 9, 2023. (5) As of December 31, 2023, the following non-employee directors held the following outstanding deferred equity awards: Mr. Mendel, 2,887 deferred RSUs; Ms. Miller, 5,819 deferred RSUs; and Mr. Subramanian, 6,124 deferred RSUs. (6) Ms. Miller's cash fees for 2023 have been deferred into 2,932 deferred RSUs. (7) Mr. Welch served on the Board of Directors until May 9, 2023 and the fees set forth above were paid to ValueAct and not Mr. Welch, in accordance with an arrangement between Mr. Welch and ValueAct.

  5. Compensation Elements

    | Compensation Component | Description/Purpose | 2023 Highlights | | Total Direct Compensation | | | | Base Salary | •Fixed compensation element •Salary levels based on market rates, executive’s experience, responsibilities, and contribution to our development and growth | •Increases in 2023 aimed at aligning with peers •Refer to “Elements of Our Compensation Programs -- Base Salaries” | | Annual Bonus | •Cash incentive designed to reward achievement of annual performance objectives •2023 annual bonuses were based on EBITDA, EBITDA margin percentage, and cash flow (each described below on page 33) | •Our 2023 financial results led to bonus payments equaling 134.5% (Corporate) and 150.3% (Wholesale - North America) of target •Refer to “Elements of Our Compensation Programs -- Annual Bonus Awards” | | Cash Long-Term Incentive (“LTI”) Award | •Cash incentive designed to reward multi-year performance, as well as the executive's continued employment over the vesting period •For each of the 2021-2023, 2022-2024 and 2023-2025 performance periods, each executive is eligible to earn from 0 to 200% of their target award based on the Company’s adjusted diluted EPS for the last year of the three-year performance period, and parts & services organic revenue growth and return on invested capital (“ROIC”), each measured as an average over the three-year performance period •For each of the performance periods amounts earned based on financial results may be multiplied up or down by up to 10% based on performance against multi-year ESG goals | •For the 2021-2023 performance period, financial goal achievement resulted in an earned amount of 200% of target •Such earned amount was multiplied by +5% based on certain performance against the Company's ESG goals, which resulted in a payout of 210% of target •Refer to “Elements of Our Compensation Programs -- Long-Term Incentive Awards” | | Performance-Based Restricted Stock Units (PSUs) | •Share-based incentive designed to align the interests of management with those of our stockholders, reward multi-year performance, and promote retention of key talent •In 2021, 2022 and 2023, executives were granted two types of units (“PSU-1s” and “PSU-2s”) that will be converted to a number of common shares, subject to achievement of performance goals, as well as the executive’s continued employment over the vesting period ◦PSU-1s generally vest over a three-year period, subject to the executive’s continued employment, but only if we achieve positive diluted EPS during any fiscal year within five years from the date of grant ◦PSU-2s may be earned from 0 to 200% of the target number of shares based on the Company's adjusted diluted EPS for the last year of the three-year performance period, and parts & services organic revenue growth and ROIC, each measured as an average over the three-year performance period | •Because positive diluted EPS was achieved for 2023, one-third of the PSU-1s granted in 2023 vested, and the remaining portion will vest over the next two years subject to continued service •For the 2021-2023 performance period, goal achievement resulted in a payout of 200% of target for the PSU-2s granted in 2021 •Refer to “Elements of Our Compensation Programs -- Long-Term Incentive Awards” |

  6. Target Total Direct Compensation Mix

    Target Total Direct Compensation Mix A significant portion of our executive compensation is in the form of incentive-based compensation. We consider our annual bonus awards, long-term incentive awards and equity incentive grants incentive-based compensation because their value depends in whole or in part on the financial performance of the Company and/or our stock performance. The following charts set forth the percentage of our Chief Executive Officer's and the other currently employed named executive officers' 2023 target total direct compensation for compensation opportunities granted in fiscal year 2023 (consisting of base salary and annual bonuses, cash LTI awards and equity incentive awards assuming target performance) that was incentive-based.

  7. Target Long-Term Incentive Award Mix

    Target Long-Term Incentive Award Mix The graphic on the left displays Mr. Zarcone’s intended target LTI mix for 2023, which consists of Cash-Based LTI (weighted 20%), PSU-1s (weighted 45%), and PSU-2s (weighted 35%). The graphic on the right displays the intended target LTI mix for 2023 for all other named executive officers, which consists of Cash-Based LTI (weighted 25%), PSU-1s (weighted 50%), and PSU-2s (weighted 25%).

  8. What Our Compensation Programs are Designed to Reward

    What Our Compensation Programs are Designed to Reward Our compensation programs are designed to reward our executive officers for the performance of our Company and the individual performance of each executive officer. Specifically, with respect to the performance of our Company, •Our annual bonus program is designed to reward successful performance based on EBITDA, EBITDA margin percentage and cash flow generation; •Our cash long-term incentive program and performance-based restricted stock units (“PSU-2s”) are designed to reward adjusted diluted EPS growth, measured based on the last year of the three-year performance period, and parts & services organic revenue growth and ROIC, each measured as an average over the three-year performance period; •Starting with the 2021-2023 performance cycle, our cash long-term incentive program includes an ESG multiplier that may increase or decrease earned amounts by up to 10% based on performance against our multi-year ESG goals; •Our traditional performance-based restricted stock units (“PSU-1s”) are designed to reward profitability; and •In addition to rewarding achievement of the performance vesting requirements for our PSU-1s and PSU-2s, all of our equity awards reward long-term total stockholder return because the ultimate value of any earned awards is tied to our stock performance during the performance and vesting periods. With respect to individual performance of an executive officer, we analyze the growth of the performance metrics that most directly relate to such individual’s area of responsibility and consider certain subjective factors, including the individual’s management and leadership skills, ability to resolve challenges and to overcome obstacles, and overall contribution to our success. Individual performance is a factor in the determination of adjustments to base salary, annual bonus targets, and long-term incentive award opportunities, along with other considerations including external market data, the unique scope of each executive’s role and responsibilities, the criticality of certain positions to our success, and internal pay parity.

  9. Executive Compensation Decision-Making

    Executive Compensation Decision-Making Role of the Compensation and Human Capital Committee and Management Management provides to the Compensation and Human Capital Committee historical compensation information relating to our executive officers to aid the deliberations of the Compensation and Human Capital Committee regarding executive officer compensation. The information typically includes historical and proposed base salaries, bonuses, long-term cash incentive awards, equity-based awards, and any other material component of compensation or benefits. The Compensation and Human Capital Committee takes into account the historical trend of each element of compensation and the total of all of the elements for each year in connection with its decisions about proposed compensation amounts. In addition, the Compensation and Human Capital Committee receives recommendations from the Chief Executive Officer regarding the compensation of the other executive officers. Role of the Compensation and Human Capital Committee’s Consultant The Compensation and Human Capital Committee has engaged Frederic W. Cook & Co., Inc. (“F.W. Cook”) as its independent executive compensation advisors. F.W. Cook reports directly to the Compensation and Human Capital Committee and does no work for management that is not under the Compensation and Human Capital Committee’s purview. The Compensation and Human Capital Committee has considered the independence of F.W. Cook and determined that its engagement of F.W. Cook did not raise any conflicts of interest with LKQ or any of our directors or executive officers. F.W. Cook periodically conducts comprehensive reviews of our executive officer compensation programs to provide competitive context for the Compensation and Human Capital Committee's decisions on setting target pay levels and incentive program design. The reviews include a comparative analysis of our executive compensation program with the executive compensation programs of a peer group of companies. The peer group used for competitive comparisons to inform the Committee's decisions on setting 2023 target pay opportunities and program design was as follows:

  10. Executive Compensation Decision-Making

    The Compensation and Human Capital Committee does not target any specific percentile with regard to setting the compensation opportunities of our executive officers in comparison to the executive officers of the peer group nor does it apply a formula or assign relative weightings to specific compensation elements. In August 2023, at the Compensation and Human Capital Committee's direction, F.W. Cook reviewed the peer group used for competitive analyses of our executive officer compensation program to inform decisions on 2024 target pay opportunities and program design. Following the review, the Company’s Compensation and Human Capital Committee added Beacon Roofing Supply, Inc. to its existing executive compensation peer group for fiscal year 2024.

  11. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    Annual Bonus Awards We offer annual bonus awards under our CIP to provide incentives for achievement of financial goals aligned with our business strategy and measured over a one-year time horizon. Each participant in the bonus program (including our named executive officers) is eligible to receive a cash payment equal to a percentage of the participant’s base salary at specified threshold, target, and maximum levels of performance. In 2023, consistent with 2022, the corporate performance measures for our executive officers’ bonuses were the Company’s EBITDA (weighted 30%), EBITDA margin percentage (weighted 30%), and free cash flow (weighted 40%). The target bonus percentage for Mr. Zarcone increased from 135% of base salary in 2022 to 150% in 2023. The bonuses for Messrs. Zarcone, Galloway, Laroyia and Hanley were based entirely on the corporate performance measures. In 2023, consistent with 2022, for Mr. Jude, who in 2023 led our Wholesale - North America segment, 20% of his bonus was based on these corporate performance measures, and 80% of his bonus was based on similar measures for his business segment. EBITDA is defined as Segment EBITDA as presented in our public filings. EBITDA margin percentage is calculated as EBITDA divided by revenue. Free cash flow reflects net cash provided by operating activities less purchases of property, plant and equipment. Our bonus plan provides for the Compensation and Human Capital Committee to make adjustments to the targets for events such as the acquisition or disposal of a business. The 2023 targets were established under the assumption that there would be no business acquisitions or disposals during the year. In August 2023, we acquired Uni-Select. As a result, pursuant to the pre-established adjustment guidelines under the plan, the Compensation and Human Capital Committee adjusted the bonus targets to reflect the projected results for this business between the acquisition date and year-end. Bonus achievement for 2023 was determined by comparing calculated results against the revised targets. Additionally, all performance measures were subject to adjustments for certain items as specified by the Compensation and Human Capital Committee at the time the bonus targets were established. Such adjustments for 2023 related to currency exchange rates; atypical environmental and legal losses; and other extraordinary, unusual or infrequently occurring items. The adjustments had the net effect of (i) increasing the reported consolidated EBITDA from $1,759 million to $1,787 million, (ii) increasing the reported EBITDA margin percentage from 12.7% to 12.9%, and (iii) increasing the reported free cash flow from $998 million to $1,064 million. The following table sets forth with respect to the 2023 annual bonus awards (a) the threshold, target, and maximum for each of the three performance metrics referenced above along with the actual achievement (which includes the adjustments previously mentioned) and (b) each executive's bonus opportunity at target along with the earned bonus amount. Performance below threshold for a given measure would result in no payment for that component. Performance at threshold, target, or maximum for a given measure would result in payment of 50%, 100%, or 200% of target, respectively, for that component. Performance between levels is linearly interpolated.

  12. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    | | 2023 Target Bonus Opportunity | | 2023 Actual Bonus Earned | | | | % Salary | $ | % of Target | $ | | Dominick Zarcone | 150% | $1,631,301 | 134.5% | $2,193,411 | | Rick Galloway | 60% | $356,260 | 134.5% | $479,019 | | Varun Laroyia | 75% | $619,705 | 134.5% | $833,242 | | Justin Jude | 60% | $385,512 | 150.3% | $579,341 | | Walter Hanley | 60% | $297,008 | 134.5% | $399,350 |

  13. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    Bonus targets are established annually upon completion of our budget and guidance setting process and are approved by the Compensation and Human Capital Committee. Targets are based on events and circumstances as of the time that annual budgets are established and guidance is set, which may be impacted by external factors, including currency exchange rates, inflation, scrap and precious metals prices, and other external events, such as tax legislation. In some instances, based on these events and circumstances, bonus targets may be set at levels lower than the prior year actual performance. In 2023, we budgeted an increase in EBITDA dollars but a decrease in EBITDA percentage as a result of inflationary effects. The 2023 target for EBITDA dollars was increased upon the acquisition of Uni-Select in August 2023 while the EBITDA percentage was further decreased as a result of the dilutive effect of the acquisition. In 2023, we anticipated incremental cash outflows relative to 2022 for capital expenditures, interest payments and tax payments. As a result, the 2023 bonus target for free cash flow was set at a level lower than actual performance in 2022. The free cash flow target was lowered with the Uni-Select acquisition in recognition of cash transaction and restructuring costs incurred in connection with the acquisition. Long Term Incentive Awards We grant performance awards each year to certain of our key employees (including our named executive officers) that are designed to reward multi-year performance, create retention incentives, and in the case of equity awards, to align the interests of recipients with those of stockholders because the realized value reflects our stockholder return. When making long-term incentive awards, we consider factors specific to each employee such as salary, position and responsibilities. We also consider factors such as the rate of the Company’s development and growth and an estimate of the value of each award. In addition, we determine the amount of dilution that we believe would be generally acceptable to our stockholders and correspondingly limit the aggregate number of equity awards granted each year. In 2023, our long-term incentive awards to certain of our key employees (including our named executive officers) consisted of a mix of the following three grant types: •Cash-Based LTI Awards: Cash-based long-term incentive opportunity granted under the CIP that may be earned from 0 to 200% of the target amount, based on performance against financial metrics measured over the three-year performance period from January 1, 2023 through December 31, 2025. The financial metrics for the 2023-2025 performance period are adjusted diluted EPS for 2025 (weighted 40%), three-year average parts & services organic revenue growth (weighted 40%), and three-year average ROIC (weighted 20%). Amounts earned based on financial performance may be multiplied up or down by up to 10% based on performance against our multi-year ESG goals. •PSU-1s: Performance-based restricted stock units granted under the Equity Incentive Plan that generally vest over a three-year period, subject to the executive’s continued employment through the date of vesting, but only if we achieve positive diluted EPS during any fiscal year within five years from the date of grant. In addition, the PSU-1s are aligned with stockholders' interests because the ultimate value of any earned shares depends on our total stockholder return over the performance and vesting period. •PSU-2s: Performance-based restricted stock units granted under the Equity Incentive Plan that may be earned from 0 to 200% of the target number of shares based on the same financial metrics as used for the cash-based LTI awards, measured over the same three-year performance period, subject to the executive's continued employment through the date of vesting. In addition to rewarding achievement of such performance objectives, the PSU-2s are aligned with stockholders' interests because the ultimate value of any earned shares depends on our total stockholder return over the performance and vesting period. Cash-Based LTI Awards Target awards are established for each participant (including each named executive officer) as a specified dollar amount that may be earned up to 200% of the target award value, based on performance against the financial goals, and may be multiplied up or down by up to 10% based on performance against our multi-year ESG goals. 2021-2023 LTI The performance measures for the 2021-2023 performance period were adjusted diluted EPS, average organic parts & services revenue growth and average ROIC. ROIC is calculated as adjusted net operating profit after tax divided by average invested capital, which is defined as average stockholders’ equity plus average net debt (calculated as total debt less cash and equivalents). The performance measures were subject to adjustments for certain items as specified by the Compensation and Human Capital Committee at the time the LTI targets were established. Such adjustments related to currency exchange rates (for adjusted diluted EPS only); asset impairments; restructuring and acquisition expenses; gains and losses related to acquisitions and divestitures; atypical environmental and legal losses; amortization expense of acquired intangibles; change in fair value of contingent consideration liabilities; results of discontinued operations; other extraordinary, unusual or infrequently occurring items; and certain other minor adjustments. Payouts between levels will be calculated using a linear function. The Compensation and Human Capital Committee, in establishing the target goals for the performance measures in 2021, took into consideration the effect of the potential adjustments that would be used to calculate the actual performance. Using the calculation method and adjustments approved by the Compensation and Human Capital Committee, diluted EPS for 2023 was increased from $3.50 on a GAAP basis to $3.98 for the LTI calculation, average organic parts & services revenue growth for 2021-2023 was increased from 5.8% to 5.9% and average ROIC for 2021-2023 was increased from 13.6% to 14.5%. In accordance with the LTI plan provisions, the impact of acquisitions with a purchase price over $50 million completed during the Performance Period (Uni-Select and Earl Owen in 2023) were excluded from the calculation of ROIC. Additionally, pursuant to the pre-established adjustment guidelines under the CIP, the Compensation and Human Capital Committee adjusted the adjusted diluted EPS target range for the impact of the Uni-Select acquisition. The organic parts & services revenue growth target was not adjusted as the Uni-Select acquisition would not impact organic parts & services revenue growth in 2023 (revenue change is reported as acquisition growth). The table below sets forth the targets for these performance measures for the 2021-2023 performance period and the actual results for each component. These results produced an earned amount that was 200% of target.

  14. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    | | Weighting | Threshold Goal (50% of target payout) | Target Goal (100% of target payout) | Maximum Goal (200% of target payout) | Actual Results | Payout | Weighted Payout | | Adjusted Diluted EPS (3rd Year) | 40.0% | $2.88 | $3.09 | $3.30 | $3.98 | 200% | 80% | | 3-Year Average Organic Parts & Services Revenue Growth | 40.0% | 1.0% | 2.0% | 3.0% | 5.9% | 200% | 80% | | 3-Year Average ROIC | 20.0% | 10.0% | 10.5% | 11.0% | 14.5% | 200% | 40% | | | | | | | Total Payout | | 200% |

  15. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    | EPS Achievement in 2025 (40% Wtg.) | 3-Year Average Parts & Services Organic Revenue Growth (40% Wtg.) | 3-Year Average ROIC (20% Wtg.) | Payout (% of Target)(1) | | <$4.25 | <3.0% | <14.50% | 0% | | $4.25 | 3.0% | 14.50% | 50% | | $4.75 | 4.5% | 15.25% | 100% | | >=$5.25 | >=6.0% | >=16.00% | 200% |

  16. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    (1) Payout percentages are calculated based on the weighted sum of the respective actual results of each performance measure. If the actual achievement is between the goal levels shown above, the payout is linearly interpolated. Each named executive officer’s threshold, target, and maximum award opportunity under the 2023-2025 LTI is set forth in the table below.

  17. Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element

    PSU-1s The PSU-1s generally vest in equal tranches over a three-year period on each six-month anniversary of the grant date, provided that we achieve positive diluted EPS during any fiscal year period within five years following the grant date. Generally, no PSU-1s vest prior to achievement of positive diluted EPS, and, if positive diluted EPS is not achieved within the five years following grant, the PSU-1 is forfeited. The performance-based condition for the PSU-1s granted in 2023 was met in February 2024, and all applicable PSU-1s that had previously met the time-based vesting condition have vested and the remaining PSU-1s will vest according to the remaining schedule of the time-based condition. PSU-2s The PSU-2s granted in 2023 generally vest based on the performance of the Company with respect to adjusted diluted EPS, three-year average parts & services organic revenue growth, and three-year average ROIC over the three-year performance period (January 1, 2023 through December 31, 2025). The table above under “2023-2025 LTI” sets forth the targets for these performance measures for the 2023-2025 performance period and the corresponding payout as percentages of target share units. Policy and Procedures for Granting Equity We grant equity awards annually, on the first business day following the Company's release of earnings for the previously completed fiscal year, and in other limited circumstances, such as commencement of employment, promotion, or for retention purposes. The Compensation and Human Capital Committee does not grant equity awards in anticipation of the release of material nonpublic information. Similarly, the Compensation and Human Capital Committee does not time the release of material nonpublic information based on equity award grant dates. Other Compensation In order to be competitive in attracting executive personnel, we provide certain other compensation to our executive officers, including matching contributions for a portion of the executive officers’ contributions to our retirement plans, payment of life insurance, disability insurance, accidental death or disability insurance premiums, and vehicle leasing. In connection with his role as Executive Vice President and CEO and Managing Director, LKQ Europe, under his letter agreement with us dated September 14, 2022 (the “Laroyia Letter Agreement”), Mr. Laroyia is entitled to a number of additional benefits through June 30, 2024, including eligibility for him and his eligible dependents to participate in the GeoBlue Plan (at the cost to him equal to the premium amounts the Company charges its U.S. employees for medical, dental, and vision coverage), reimbursement for the cost associated with his family joining a health club, tax equalization on his total compensation on the basis of Illinois residency and Company paid annual tax preparation services, relocation benefits, a housing allowance, school tuition in Switzerland, family travel reimbursement, and a company vehicle. In fiscal year 2023, other than with respect to Mr. Laroyia, as described above, we did not provide our named executive officers with any material perquisites. See footnote 4 to the Summary Compensation Table for more information regarding these items of other compensation.

  18. Severance Protection

    Severance Protection Severance Policy We have a Severance Policy for Key Executives (the “Severance Policy”), including all of our named executive officers. The Severance Policy sets forth in a written document the terms and conditions that the Company would normally expect to follow upon an involuntary separation of service of a key executive. We believe that it is in the Company's interest to have a formal Severance Policy to provide increased certainty for the executives and the Company in the event of a severance. Further, the formalization of the policy is expected to assist the Company with the recruitment and retention of key executives, provide the Company with important protections, and reduce costs in the event of a dispute. The Severance Policy provides cash severance and other benefits in the event of a termination by the Company without “cause” or by the Covered Executive (as defined below) with “good reason” (as each term is defined in the Severance Policy or as supplemented by the Laroyia Letter Agreement for Mr. Laroyia). For additional information about our Severance Policy, refer to “Potential Payments Upon Termination or Change in Control” on page 46. Change of Control Agreements We have Change of Control Agreements with certain of our employees, including each of our named executive officers, that provide cash severance and other benefits in the event of a qualifying termination of employment within 12 months prior to or 24 months following a Change of Control, as defined in the agreements. We provide these agreements to ensure these executives are able to objectively consider transactions that will benefit stockholders even if it is likely to result in termination of the executives' employment. The agreements have an initial term of three years and will automatically renew for a two-year period at the end of the initial term and each two-year anniversary thereafter, unless notice of termination is given by the Company at least 60 days before any such renewal date. The operative provisions of the agreements will apply, however, only if a Change of Control, as defined in the agreements, occurs during the period the agreement is in effect. For additional information about our Change of Control Agreements, refer to “Potential Payments Upon Termination or Change in Control” on page 46.

  19. Compensation-Related Governance Policies

    Compensation-Related Governance Policies Performance-Based Compensation Recovery Policy In March 2019, our Compensation and Human Capital Committee adopted a Performance-Based Compensation Recovery Policy applicable to performance-based compensation granted to our executive officers on or after January 1, 2019. In the event that the Board of Directors determines that an executive officer engaged in fraud or intentional misconduct that caused the need for a material negative restatement of our financial statements, our Board of Directors, in its discretion and to the extent legally permitted, may recapture the incremental portion of compensation from any cash or equity-based award granted to such executive officer in the preceding three years in excess of the amount that would have been paid or payable based on the restated financial results. In compliance with the requirements of the Dodd-Frank Act, final SEC rules, and NASDAQ listing standards, the Board of Directors adopted a Policy for Recoupment of Incentive Compensation (“Clawback Policy”), effective as of September 2023. The Clawback Policy requires the Company to seek recoupment of certain incentive-based compensation received by current and former Section 16 officers if the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under the securities laws. Stock Ownership Requirements Each of our named executive officers is expected to hold a minimum of at least the number of shares equal in value to a multiple of his or her annual base salary as set forth below. These requirements are to be satisfied within five years of an individual becoming subject to the requirements. Until the expected level of ownership is achieved, each executive must retain at least 50% of the net-after-tax shares from equity compensation vesting. For purposes of our stock ownership requirements, we include the number of shares actually owned by the named executive officer in his or her own name or in the name of an estate planning entity of which the named executive officer is the sole beneficiary. We also include restricted stock units. However, we exclude any shares of stock that the named executive officer has a right to acquire through the exercise of stock options and any shares of stock subject to the three-year performance awards (PSU-2s). The complete guidelines can be found on our website at www.lkqcorp.com (click the “Corporate Governance” link under “Investor Relations”). All named executive officers meet the ownership guidelines.

  20. Compensation-Related Governance Policies

    Insider Trading We have a comprehensive insider trading policy that is applicable to, among others, our named executive officers. The policy prohibits trading during quarterly “blackout” periods and other periods during which material information about us has not been publicly disclosed. Pledging/Hedging The Company’s policies prohibit our directors, officers, and employees from pledging our common stock or engaging in hedging transactions involving our common stock, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars, and exchange funds. Forfeiture of Equity Awards for Restrictive Covenant Violations Our equity awards generally provide that our executive officers will forfeit to the Company their unvested equity awards, the shares received upon vesting of the equity awards, and the proceeds from the sale of shares received upon vesting of such equity awards if the executive officer violates the restrictive covenants in the award agreements relating to the equity awards. The restrictive covenants prohibit the executive officer from competing with us, soliciting our customers and employees, and improperly using our confidential information, for a specified period after the executive officer’s affiliation with us ceases.

  21. Taxation of “Parachute” Payments and Deferred Compensation

    Taxation of “Parachute” Payments and Deferred Compensation We do not provide our named executive officers with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999, or 409A of the Code. Sections 280G and 4999 of the Code provide that executive officers, directors who hold significant equity interests in our Company, and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of our Company that exceeds certain prescribed limits, and that the Company, or a successor, may forfeit a deduction on the amounts subject to this additional tax. Section 409A of the Code also imposes additional significant taxes on an executive officer, director or other service provider to the Company in the event that he or she receives “deferred compensation” that does not meet certain requirements of Section 409A of the Code.

  22. Accounting for Stock-Based Compensation

    Accounting for Stock-Based Compensation We follow FASB ASC Topic 718, for our stock-based awards. FASB ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options, restricted stock unit awards and performance unit awards (including PSUs), based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below for equity awards to our named executive officers as required by the applicable SEC rules. FASB ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that the recipient of such compensation is required to render service in exchange for the option or other award. For performance unit awards (including PSUs), stock-based compensation expense recognized may be adjusted over the performance period based on interim estimates of performance against pre-set objectives.

  23. Summary Compensation Table

    Summary Compensation Table The following table includes information concerning compensation for the fiscal years ended December 31, 2023, 2022, and 2021 paid to our named executive officers and their principal position with us as of the fiscal year-end December 31, 2023:

  24. Summary Compensation Table

    | Name and Principal Position | Year | Salary (1) | Stock Awards (2) | Non-Equity Incentive Plan Compensation (3) | All Other Compensation (4) | Total | | Dominick Zarcone | 2023 | $1,087,534 | $5,800,064 | $5,133,411 | $168,012 | $12,189,021 | | President and CEO | 2022 | $1,050,000 | $5,000,075 | $4,515,281 | $175,536 | $10,740,892 | | | 2021 | $1,050,000 | $4,200,026 | $4,035,000 | $160,610 | $9,445,636 | | Rick Galloway* | 2023 | $593,767 | $1,080,021 | $807,711 | $55,113 | $2,536,612 | | SVP and CFO | 2022 | $437,900 | $810,102 | $635,578 | $43,183 | $1,926,763 | | Varun Laroyia | 2023 | $826,274 | $1,650,037 | $1,883,242 | $458,285 | $4,817,838 | | EVP and CEO and Managing Director, LKQ Europe | 2022 | $792,438 | $3,325,072 | $1,851,666 | $161,508 | $6,130,684 | | | 2021 | $764,904 | $1,500,026 | $1,657,356 | $72,066 | $3,994,352 | | Justin Jude | 2023 | $642,521 | $1,410,108 | $1,314,341 | $71,372 | $3,438,342 | | SVP of Operations - Wholesale Parts Division | 2022 | $614,959 | $1,110,095 | $1,316,067 | $68,075 | $3,109,196 | | | 2021 | $587,260 | $1,050,064 | $1,064,712 | $50,393 | $2,752,429 | | Walter Hanley | 2023 | $495,014 | $1,125,101 | $1,134,350 | $63,865 | $2,818,330 | | SVP - Development | 2022 | $477,479 | $1,080,061 | $1,080,236 | $63,861 | $2,701,637 | | | 2021 | $467,452 | $1,050,064 | $980,942 | $51,986 | $2,550,444 |

  25. Summary Compensation Table

    * Compensation for 2021 for Mr. Galloway is not disclosed because he was not a named executive officer during that fiscal year. (1) The base compensation of our executive officers is discussed beginning on page 32. (2) The amounts shown above represent the aggregate grant date fair value of awards granted during the period indicated, calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the volume-weighted average price of underlying shares on the date of grant by the number of awards granted. PSU-1s have only a single possible achievement level (target), which was the basis for the grant date fair value disclosed in the table above. PSU-2s may be earned from 0% to 200% of the target number of share units based on performance versus goals for the performance period beginning January 1, 2023 and ending December 31, 2025 and were valued based on performance at 100% of target in the table above. The following table summarizes the grant date fair value of the 2023 PSU-1 and PSU-2 awards as disclosed above and at maximum achievement levels for each executive:

  26. Summary Compensation Table

    | | PSU-1s Grant Date Fair Value | | PSU-2s Grant Date Fair Value | | | Name | Target | Maximum | Target | Maximum | | Dominick Zarcone | $3,262,518 | $3,262,518 | $2,537,546 | $5,075,091 | | Rick Galloway | $720,014 | $720,014 | $360,007 | $720,014 | | Varun Laroyia | $1,100,025 | $1,100,025 | $550,012 | $1,100,025 | | Justin Jude | $940,053 | $940,053 | $470,055 | $940,110 | | Walter Hanley | $750,048 | $750,048 | $375,053 | $750,105 |

  27. Summary Compensation Table

    (3) Our Non-Equity Incentive Plan Compensation includes amounts related to our cash-based LTI awards and annual bonus awards. The amounts for each named executive officer for each of these award categories are set forth in the table below. The amounts shown under Cash-Based LTI Earned for 2023 are equal to the amounts earned and subsequently paid for the 2021-2023 performance period, the amounts shown under Cash-Based LTI Earned for 2022 are equal to the amounts earned and subsequently paid for the 2020-2022 performance period and the amounts shown under Cash-Based LTI Earned for 2021 are equal to the amounts earned and subsequently paid for the 2019-2021 performance period. The amounts shown under Annual Bonus Earned are equal to the amounts earned and subsequently paid for each annual performance period under our annual bonus program related to the years presented. For more information regarding our annual incentive awards, see the section entitled “Annual Bonus Awards” beginning on page 33. For more information regarding our Cash-Based LTI awards, see the section entitled “Long Term Incentive Awards” beginning on page 34.

  28. Summary Compensation Table

    | Name | Year | Cash-Based LTI Earned | Annual Bonus Earned | Total | | Dominick Zarcone | 2023 | $2,940,000 | $2,193,411 | $5,133,411 | | | 2022 | $2,152,500 | $2,362,781 | $4,515,281 | | | 2021 | $1,200,000 | $2,835,000 | $4,035,000 | | Rick Galloway | 2023 | $328,692 | $479,019 | $807,711 | | | 2022 | $259,161 | $376,417 | $635,578 | | Varun Laroyia | 2023 | $1,050,000 | $833,242 | $1,883,242 | | | 2022 | $861,000 | $990,666 | $1,851,666 | | | 2021 | $510,000 | $1,147,356 | $1,657,356 | | Justin Jude | 2023 | $735,000 | $579,341 | $1,314,341 | | | 2022 | $602,700 | $713,367 | $1,316,067 | | | 2021 | $360,000 | $704,712 | $1,064,712 | | Walter Hanley | 2023 | $735,000 | $399,350 | $1,134,350 | | | 2022 | $602,700 | $477,536 | $1,080,236 | | | 2021 | $420,000 | $560,942 | $980,942 |

  29. Summary Compensation Table

    (4) The amounts include Company matching contributions under retirement plans, payment of life insurance, disability insurance, accidental death or disability insurance premiums, and other miscellaneous compensation related payments.

  30. Summary Compensation Table

    | Name | Retirement Plans | Life Insurance Premiums | Disability Insurance Premiums | Other | Total | | Dominick Zarcone | $137,910 | $20,538 | $9,564 | $— | $168,012 | | Rick Galloway | $45,825 | $2,267 | $7,021 | $— | $55,113 | | Varun Laroyia | $81,524 | $4,342 | $8,812 | $363,607(a) | $458,285 | | Justin Jude | $61,024 | $2,715 | $7,633 | $— | $71,372 | | Walter Hanley | $46,399 | $6,862 | $10,604 | $— | $63,865 |

  31. Summary Compensation Table

    (a) Other compensation for Mr. Laroyia consists of reimbursement of (i) relocation expenses ($50,348), (ii) housing ($206,855), (iii) tuition ($30,169), (iv) two vehicle leases ($48,606) and (v) family travel between the United States and Europe ($27,041), pursuant to his offer letter from the Company relating to his assignment in Europe. Mr. Laroyia is also eligible to receive tax equalization benefits. The amount for 2023 has not yet been determined as it will be calculated and paid when his tax return is completed later in 2024.

  32. Grants of Plan-Based Awards for Fiscal Year-End December 31, 2023

    Grants of Plan-Based Awards for Fiscal Year-End December 31, 2023 The following table sets forth information regarding plan-based awards granted by us to the named executive officers during the last fiscal year. All equity awards were granted under the Company's Equity Incentive Plan.

  33. Grants of Plan-Based Awards for Fiscal Year-End December 31, 2023

    | Name | Award Type | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2)(3) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards (4) ($) | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Dominick Zarcone | PSU-1 | 2/24/2023 | $— | $— | $— | — | 57,247 | — | — | $3,262,518 | | | PSU-2 | 2/24/2023 | $— | $— | $— | 22,263 | 44,526 | 89,052 | — | $2,537,546 | | | Annual Bonus | | $815,651 | $1,631,301 | $3,262,603 | — | — | — | — | $— | | | LTI | | $725,000 | $1,450,000 | $2,900,000 | — | — | — | — | $— | | Rick Galloway | PSU-1 | 2/24/2023 | $— | $— | $— | — | 12,634 | — | — | $720,014 | | | PSU-2 | 2/24/2023 | $— | $— | $— | 3,159 | 6,317 | 12,634 | — | $360,007 | | | Annual Bonus | | $178,130 | $356,260 | $712,521 | — | — | — | — | $— | | | LTI | | $180,000 | $360,000 | $720,000 | — | — | — | — | $— | | Varun Laroyia | PSU-1 | 2/24/2023 | $— | $— | $— | — | 19,302 | — | — | $1,100,025 | | | PSU-2 | 2/24/2023 | $— | $— | $— | 4,826 | 9,651 | 19,302 | — | $550,012 | | | Annual Bonus | | $309,853 | $619,705 | $1,239,411 | — | — | — | — | $— | | | LTI | | $275,000 | $550,000 | $1,100,000 | — | — | — | — | $— | | Justin Jude | PSU-1 | 2/24/2023 | $— | $— | $— | — | 16,495 | — | — | $940,053 | | | PSU-2 | 2/24/2023 | $— | $— | $— | 4,124 | 8,248 | 16,496 | — | $470,055 | | | Annual Bonus | | $192,756 | $385,512 | $771,025 | — | — | — | — | $— | | | LTI | | $235,000 | $470,000 | $940,000 | — | — | — | — | $— | | Walter Hanley | PSU-1 | 2/24/2023 | $— | $— | $— | — | 13,161 | — | — | $750,048 | | | PSU-2 | 2/24/2023 | $— | $— | $— | 3,291 | 6,581 | 13,162 | — | $375,053 | | | Annual Bonus | | $148,504 | $297,008 | $594,016 | — | — | — | — | $— | | | LTI | | $187,500 | $375,000 | $750,000 | — | — | — | — | $— |

  34. Grants of Plan-Based Awards for Fiscal Year-End December 31, 2023

    (1) The amounts shown related to the annual bonus awards represent payments that were possible for the 2023 annual performance period. The annual awards for 2023 were calculated as a percentage of weighted average salary of the named executive officer. If the actual achievement is between these levels (between threshold and target or target and maximum), the payout is linearly interpolated. The 2023 annual awards for our named executive officers have been earned and paid, and the actual amount earned by each named executive officer is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The amounts shown related to our LTI represent potential payments after the completion of the three-year performance period ending December 31, 2025. If the actual achievement is between these levels (between threshold and target or target and maximum), the payout is linearly interpolated. See “Executive Compensation - Compensation Discussion and Analysis” for more information. (2) The amounts shown for the PSU-1 award type represent the number of shares to be paid out upon the vesting of performance-based RSUs granted during the year. PSU-1 awards only provide for a single performance condition, so no threshold or maximum payouts are disclosed, and there is either a full payout of the amount shown (subject to time-based vesting) or no payout. See “Executive Compensation - Compensation Discussion and Analysis” for more information. (3) In 2023, LKQ granted performance-based three-year equity awards (PSU-2s) under our Equity Incentive Plan. As these awards are performance-based, the exact number of shares to be paid may be zero or may range from 50% to 200% of the target number of shares, depending on the Company's performance and the achievement of certain performance metrics (adjusted diluted EPS, three-year average organic parts & services revenue growth, and three-year average ROIC) over the three-year period ending December 31, 2025. The amounts shown represent the number of shares that may be paid out upon achievement of the threshold, target, and maximum performance levels. Payout for performance between levels will be linearly interpolated. See “Executive Compensation - Compensation Discussion and Analysis” for more information. (4) The amounts disclosed under the “Grant Date Fair Value of Stock and Option Awards” column represent the grant date fair value calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For more information, please see Footnote 2 to the Summary Compensation Table above.

  35. Outstanding Equity Awards at Fiscal Year-End December 31, 2023

    Outstanding Equity Awards at Fiscal Year-End December 31, 2023 The following table sets forth information regarding the status of equity awards held by the named executive officers at December 31, 2023.

  36. Outstanding Equity Awards at Fiscal Year-End December 31, 2023

    | | Stock Awards (1) | | | | | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2)(3) | | Dominick Zarcone | 98,005 | $4,683,659 | 251,830 | $12,034,956 | | Rick Galloway | 28,038 | $1,339,936 | 26,062 | $1,245,503 | | Varun Laroyia | 52,171 | $2,493,252 | 66,778 | $3,191,321 | | Justin Jude | 27,092 | $1,294,727 | 49,834 | $2,381,567 | | Walter Hanley | 23,554 | $1,125,646 | 46,090 | $2,202,641 |

  37. Outstanding Equity Awards at Fiscal Year-End December 31, 2023

    (1) The stock awards include RSUs, PSU-1s and PSU-2s. PSU-1s generally vest in equal tranches on March 1 and September 1 over a three-year period on each six-month anniversary of the grant date based on continued service, provided that we achieve positive diluted EPS during any fiscal year period within five years following the grant date. Generally, no PSU-1s vest prior to achievement of positive diluted EPS, and, if positive diluted EPS is not achieved within the five years following grant, the PSU-1 is forfeited. The performance-based conditions for the PSU-1s granted in 2021, 2022 and 2023 were met, and all applicable PSU-1s that had previously met the time-based vesting condition vested immediately and the remaining PSU-1s will vest according to the remaining schedule of the time-based condition. We granted performance-based restricted stock units (PSU-2s) in 2021, 2022 and 2023. The exact number of shares to be paid out after completion of the performance period may be up to twice the grant amount. The following table sets forth the vesting schedule of the unvested number of RSUs, PSU-1s and PSU-2s for each named executive officer as of December 31, 2023, with the 2021 PSU-2s based on actual achievement of 200% of target for the performance period ended December 31, 2023, and the 2022 and 2023 PSU-2s, for which the performance period has not yet ended, based on maximum potential achievement:

  38. Outstanding Equity Awards at Fiscal Year-End December 31, 2023

    | | 2024 | 2025 | 2026 | 2027 | 2028 | Total | | Dominick Zarcone | 132,667 | 118,575 | 98,593 | — | — | 349,835 | | Rick Galloway | 18,805 | 17,473 | 17,025 | 797 | — | 54,100 | | Varun Laroyia | 64,953 | 31,477 | 22,519 | — | — | 118,949 | | Justin Jude | 34,534 | 23,148 | 19,244 | — | — | 76,926 | | Walter Hanley | 32,730 | 21,559 | 15,355 | — | — | 69,644 |

  39. Outstanding Equity Awards at Fiscal Year-End December 31, 2023

    (2) The amounts shown in these columns are based on the closing price ($47.79) of a share of our common stock on December 29, 2023, the last trading day of fiscal year 2023. (3) The amounts shown in these columns include shares subject to PSU-2s, with the numbers and values of such shares based on actual achievement for the 2021 PSU-2s, for which the performance period ended December 31, 2023, and maximum potential achievement for the PSU-2s granted in 2022 and 2023, for which the performance period has not yet ended.

  40. Option Exercises and Stock Vested for Fiscal Year-End December 31, 2023

    Option Exercises and Stock Vested for Fiscal Year-End December 31, 2023 The following table sets forth information regarding the vesting of the named executive officers' RSUs, PSU-1s, and PSU-2s during the last fiscal year.

  41. Option Exercises and Stock Vested for Fiscal Year-End December 31, 2023

    | | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | Dominick Zarcone | 130,422 | $7,259,627 | | Rick Galloway | 8,009 | $463,057 | | Varun Laroyia | 68,216 | $3,787,276 | | Justin Jude | 35,341 | $1,967,780 | | Walter Hanley | 35,136 | $1,956,449 |

  42. Option Exercises and Stock Vested for Fiscal Year-End December 31, 2023

    (1) The amounts shown in this column are based on the volume-weighted average price of a share of our common stock on the vesting date of the applicable stock awards.

  43. Pension Benefits

    Pension Benefits None of our named executive officers participated in or received benefits from a pension plan during the last fiscal year or in any prior year.

  44. Nonqualified Deferred Compensation for Fiscal Year- End December 31, 2023

    Nonqualified Deferred Compensation for Fiscal Year- End December 31, 2023 The following table sets forth information regarding the accounts of the named executive officers in the retirement plans that supplement our 401(k) plan. These supplemental plans are discussed beginning on page 37.

  45. Nonqualified Deferred Compensation for Fiscal Year- End December 31, 2023

    | Name | Executive Contributions in Last FY (1) | Registrant Contributions in Last FY (2) | Aggregate Earnings in Last FY(3) | Aggregate Withdrawals/Distributions | Aggregate Balance at Last FYE (4) | | Dominick Zarcone | $968,249 | $125,535 | $280,379 | $— | $3,434,645 | | Rick Galloway | $152,548 | $33,450 | $64,025 | $— | $407,305 | | Varun Laroyia | $159,634 | $69,149 | $158,123 | $— | $1,051,373 | | Justin Jude | $137,452 | $48,649 | $380,178 | $— | $3,779,197 | | Walter Hanley | $58,329 | $34,024 | $733,963 | $— | $4,467,921 |

  46. Nonqualified Deferred Compensation for Fiscal Year- End December 31, 2023

    (1) These amounts represent contributions to the supplemental plan by the named executive officers from their respective 2023 salaries and 2022 bonuses (paid in 2023) reported in the Summary Compensation Table under the columns entitled “Salary” (in 2023) and “Non-Equity Incentive Plan Compensation” (in 2022). (2) These amounts were also reported in the Summary Compensation Table under the column entitled “All Other Compensation” for fiscal year 2023. These amounts represent aggregate contributions to the supplemental plan by the Company for fiscal year 2023. (3) These amounts represent aggregate interest or other earnings accrued during fiscal year 2023. (4) These amounts represent money we owe the named executive officers for salaries and incentive compensation they earned in prior years but did not receive because they elected to defer receipt. The following amounts of executive and Company contributions were included in the Summary Compensation Table in prior years: Mr. Zarcone - $1,953,178; Mr. Galloway - $81,232; Mr. Laroyia - $620,595; Mr. Jude - $932,950; and Mr. Hanley - $2,712,179. Refer to page 37 for a description of the terms of the plan.

  47. Potential Payments Upon Termination or Change in Control

    Potential Payments Upon Termination or Change in Control Severance Policy The Severance Policy applies to the executive officers of the Company and any other executive designated by the Compensation and Human Capital Committee (“Covered Executives”). It provides that, in the event the employment of a Covered Executive is terminated by the Company without “cause” or by the Covered Executive with “good reason” (as each term is defined in the Severance Policy or as supplemented by the Laroyia Letter Agreement for Mr. Laroyia), the Company will provide to such Covered Executive (a) a pro rata bonus for the year in which the termination occurs (based on the actual performance achieved, as applicable to other active participants), (b) during the Severance Period (defined as 18 months in the case of the Chief Executive Officer and our Chief Financial Officer and 12 months for all other Covered Executives except for Mr. Laroyia who also has a Severance Period of 18 months), a monthly severance payment equal to one-twelfth of the sum of the Covered Executive’s latest annual base salary and the average annual bonus (for the two prior full fiscal years), (c) a pro rata payment of any pending long term incentive award (based on the actual performance achieved, as applicable to other active participants), (d) Company-subsidized health and dental coverage during the applicable Severance Period, (e) continuation of vesting of outstanding performance based restricted stock units and other restricted stock units during the applicable Severance Period, and (f) outplacement services. The foregoing payments and benefits for a Covered Executive could be reduced in connection with the application of Internal Revenue Code Section 280G if such a reduction would enable the Covered Executive to financially benefit on an after-tax basis. The receipt by a Covered Executive of any severance benefits is conditioned upon (a) the delivery by the Covered Executive of a full and unconditional release of all claims against the Company, and (b) compliance by the Covered Executive during the Severance Period with provisions relating to confidentiality, non-competition, non-solicitation of the Company’s customers, and non-hiring of the Company’s employees. Change of Control Agreements The Change of Control Agreements with our executive officers provide certain severance payments and other benefits upon a qualifying termination. Each of our named executive officers is a party to a change of control agreement. If the employee’s employment with the Company is terminated within two years following a Change of Control (or within 12 months prior to a Change of Control in certain circumstances) as a result of an Involuntary Termination (as defined in the agreements), then the employee will be entitled to receive payments and benefits that include the following: •Payment of salary and other compensation accrued through the termination date; •Payment of a pro rata annual bonus (in a lump-sum); •A lump sum severance payment equal to two times (two-and-one-half times in the case of Mr. Zarcone) the sum of the employee's (a) salary and (b) the greater of the employee's target annual bonus or average annual bonus over the preceding three years; •If applicable, all unreimbursed relocation expenses; •Continuing coverage of the employee and the employee's dependents under the Company's health and dental care plans for up to a period of 24 months (30 months in the case of Mr. Zarcone); •Outplacement services; and •The employee's outstanding equity-based compensation awards shall become vested and exercisable in full (in the case of performance-based awards, based on actual or assumed performance). If the employee’s employment with the Company is terminated as a result of death or disability, the employee or his or her estate will be entitled to receive salary and other compensation accrued through the termination date and a pro rata annual bonus (in a lump-sum). If the employee’s employment with the Company is terminated for Cause or the employee resigns for other than Good Reason (as those terms are defined in the agreement) the employee will be entitled to receive salary and other compensation accrued through the termination date. The agreement also contains confidentiality obligations on the part of the employee that survive indefinitely and requires that the employee deliver a release to the Company as a condition to receiving payments of benefits under the agreement. The agreement also provides that in the event of a dispute concerning an agreement, the Company will pay the legal fees of the employee. Under the agreements, a “Change of Control” would include any of the following events: •any “person,” as defined in the Exchange Act, acquiring 30% or more of our outstanding common stock or combined voting power of our outstanding securities, subject to certain exceptions; •during a two-year period, our current directors (or new directors approved by them) cease to constitute a majority of our Board; and •a merger, consolidation, share exchange, reorganization or similar transaction involving the Company or any of its subsidiaries, a sale of substantially all the Company’s assets, or the acquisition of assets or stock of another entity by the Company (unless following such business combination transaction a majority of the Company’s directors continue as directors of the resulting entity, the holders of the outstanding voting securities of the Company immediately prior to such an event continue to own shares or other securities that represent more than 50% of the combined voting power of the resulting entity after such event in substantially the same proportions as their ownership prior to such business combination transaction, and no person owns 30% or more of the resulting entity’s common stock or voting securities). The Change of Control Agreements with the Company’s executive officers were amended to address the potential overlap of benefits under the Change of Control Agreement and the Severance Policy. As a result of these revisions, in the event of a Change of Control of the Company, a Covered Executive who is a party to a Change of Control Agreement and who experiences a qualifying termination will generally be eligible only for the benefits under the Change of Control Agreement (and not Severance Policy benefits). Moreover, if a Covered Executive had already received benefits under the Severance Policy, such received benefits would reduce or offset the benefits (to the extent that they are the same type of benefit) that are otherwise provided to the Covered Executive under the Change of Control Agreement. Other Change of Control Payments

  48. Potential Payments Upon Termination or Change in Control

    Pursuant to the Company's Equity Incentive Plan, for equity awards, upon a Change of Control, if the acquiror assumes the awards on substantially the terms existing prior to the Change of Control, the vesting periods and/or conditions of the awards do not accelerate; if the acquiror does not assume the award or if the participant’s employment is terminated within two years of the Change of Control, the awards will be deemed fully vested (for performance-based awards, the vesting will be based on the actual or assumed achievement of the performance goals as determined by the Compensation and Human Capital Committee). Pursuant to the terms of our Cash Incentive Plan, upon a Change of Control, participants remain eligible to receive payments in accordance with the terms of outstanding cash bonus awards subject to continued service, provided that the annual cash bonus awards will be calculated based on the better of actual achievement of the performance goals or the target achievement. In addition, if the acquiror does not assume the annual cash bonus awards or if the participant’s employment is terminated within two years of the Change of Control, the annual cash bonus awards will be deemed earned based on the better of actual achievement of the performance goals or the target achievement. The following table summarizes the value of payments and benefits that our named executive officers who were employed as of December 31, 2023 would have received under the circumstances described in the table assuming the event occurred on December 31, 2023. The table excludes amounts that were fully-earned as of December 31, 2023, such as accrued but unpaid salary, earned annual bonus awards for the one-year performance period ended December 31, 2023, and earned cash-based long-term incentive awards and PSU-2s for the three year performance period ended December 31, 2023.

  49. Potential Payments Upon Termination or Change in Control

    | | Involuntary Termination (1)(2) | Change of Control where LTI Awards are not Assumed or Continued (3) | Involuntary Termination in Connection with a Change of Control (1) | Death or Disability (4) | | Dominick Zarcone | | | | | | Cash Severance (5) | $5,548,336 | $— | $9,181,747 | $4,425,246 | | Unvested and Accelerated Share-based Awards | 3,771,730 | 4,683,659 | 4,683,659 | 4,683,659 | | PSU - 2 Awards (6) | 2,497,006 | 4,624,903 | 4,624,903 | 4,277,301 | | Cash-Based Long-Term Incentive (7) | 1,567,606 | 3,076,409 | 3,076,409 | 2,850,000 | | Medical and Dental Benefits (8) | 58,340 | — | 97,233 | — | | Other Benefits and Perquisites (9) | 7,500 | — | 7,500 | — | | Total | $13,450,518 | $12,384,971 | $21,671,451 | $16,236,206 | | Rick Galloway | | | | | | Cash Severance (5) | $1,441,063 | $— | $1,920,000 | $2,434,122 | | Unvested and Accelerated Share-based Awards | 905,668 | 1,339,936 | 1,339,936 | 1,339,936 | | PSU - 2 Awards (6) | 248,501 | 550,391 | 550,391 | 515,797 | | Cash-Based Long-Term Incentive (7) | 244,252 | 546,378 | 546,378 | 520,433 | | Medical and Dental Benefits (8) | 65,481 | — | 87,308 | — | | Other Benefits and Perquisites (9) | 7,500 | — | 7,500 | — | | Total | $2,912,465 | $2,436,705 | $4,451,513 | $4,810,288 | | Varun Laroyia | | | | | | Cash Severance (5) | $2,856,017 | $— | $3,628,748 | $3,653,243 | | Unvested and Accelerated Share-based Awards | 2,185,771 | 2,493,252 | 2,493,252 | 2,493,252 | | PSU - 2 Awards (6) | 595,881 | 1,057,103 | 1,057,103 | 974,151 | | Cash-Based Long-Term Incentive (7) | 589,936 | 1,159,903 | 1,159,903 | 1,075,000 | | Medical and Dental Benefits (8) | 43,503 | — | 58,005 | — | | Other Benefits and Perquisites (9) | 7,500 | — | 7,500 | — | | Total | $6,278,608 | $4,710,258 | $8,404,511 | $8,195,646 | | Justin Jude | | | | | | Cash Severance (5) | $1,359,040 | $— | $2,556,975 | $3,038,633 | | Unvested and Accelerated Share-based Awards | 780,220 | 1,294,727 | 1,294,727 | 1,294,727 | | PSU - 2 Awards (6) | 419,998 | 814,170 | 814,170 | 755,703 | | Cash-Based Long-Term Incentive (7) | 443,224 | 899,837 | 899,837 | 840,000 | | Medical and Dental Benefits (8) | 16,575 | — | 33,151 | — | | Other Benefits and Perquisites (9) | 7,500 | — | 7,500 | — | | Total | $3,026,557 | $3,008,734 | $5,606,360 | $5,929,063 | | Walter Hanley | | | | | | Cash Severance (5) | $1,019,239 | $— | $2,019,471 | $2,652,388 | | Unvested and Accelerated Share-based Awards | 694,006 | 1,125,646 | 1,125,646 | 1,125,646 | | PSU - 2 Awards (6) | 408,617 | 723,123 | 723,123 | 666,240 | | Cash-Based Long-Term Incentive (7) | 403,813 | 793,219 | 793,219 | 735,000 | | Medical and Dental Benefits (8) | 43,654 | — | 87,308 | — | | Other Benefits and Perquisites (9) | 7,500 | — | 7,500 | — | | Total | $2,576,829 | $2,641,988 | $4,756,267 | $5,179,274 |

  50. Potential Payments Upon Termination or Change in Control

    (1) Involuntary Termination means termination of employment by the Company without Cause (as defined in the Severance Policy or Change of Control Agreement) or resignation of employment by the named executive officer for Good Reason (as defined in the Severance Policy or Change of Control Agreement or as supplemented by the Laroyia Letter Agreement for Mr. Laroyia). (2) The amount shown for the Cash Severance payment would be paid out in equal monthly installments over the Severance Period (18 months in the case of our Chief Executive Officer and our Chief Financial Officer or 12 months in the case of all other Covered Executives except for Mr. Laroyia who also has a Severance Period of 18 months). The Unvested and Accelerated Share Based Awards amount represents the value of share-based awards (using the market value of LKQ common stock on the last trading day of 2023, $47.79) that would continue to vest during the Severance Period (18 months in the case of our Chief Executive Officer, our Chief Financial Officer and Mr. Laroyia or 12 months in the case of all other Covered Executives). (3) For the avoidance of doubt, all LTI is subject to “double trigger” vesting acceleration in the event of a change of control. (4) The amount shown for the Cash Severance payment represents the life insurance proceeds payable to the named executive officer’s beneficiaries pursuant to company-provided life insurance coverage in the event of death. In the event of disability each of the named executive officers would receive long-term disability payments equal to $30,000 per month until he reached the age of 65 pursuant to employer-funded long-term disability insurance coverage. (5) For description of what is included in the cash severance, see above on page 46. (6) The performance period for the PSU-2s granted in 2021 ended on December 31, 2023, and therefore these are not included in the table above. Pursuant to our Severance Policy, upon Involuntary Termination without Cause, not related to a Change of Control, the PSU-2s granted in 2022 would be earned on December 31, 2024, which is during the assumed Severance Period for all named executive officers, but the PSU-2s granted in 2023 would not vest during the assumed Severance Period. Amounts presented above are based on projected performance as of December 31, 2023. Pursuant to the award agreement for the PSU-2s, upon Involuntary Termination without Cause Following a Change of Control or Change in Control where LTI Awards are not Assumed or Continued, vesting of the PSU-2s granted in 2022 and 2023 would accelerate based on projected performance as of December 31, 2023. Pursuant to the award agreement, upon termination due to death or Disability, vesting of the PSU-2s granted in 2022 and 2023 would accelerate at target. (7) The performance period for the Cash-Based Long-Term Incentives granted in 2021 ended on December 31, 2023, and therefore these are not included in the table above. Pursuant to the Severance Policy, upon Involuntary Termination without Cause, not related to a Change of Control, a pro-rated portion of each of the Cash-Based Long-Term Incentives granted in 2022 and 2023 would be earned, based on actual performance at the end of the performance period. Amounts presented above are based on projected performance as of December 31, 2023. Pursuant to the CIP, upon Involuntary Termination without Cause Following a Change of Control or Change in Control where LTIP Awards are not Assumed or Continued, each of the Cash-Based Long-Term Incentives granted in 2022 and 2023 would be earned at the greater of actual achievement or target. Amounts presented above are based on actual achievement as of December 31, 2023. Pursuant to the CIP, upon termination due to death or Disability, the Cash-Based Long-Term Incentives granted in 2022 and 2023 would be earned at target. (8) Medical and Dental Benefits reflect the lump sum payment to each named executive officer in the event that the terms of the Company’s Health Plans (as defined in the agreement) do not allow participation subsequent to a termination or Change of Control. In the event the Health Plans do allow participation, such benefits paid by the Company will be dependent on actual claims incurred due to the self-insured nature of the Company’s plans. Medical and dental benefits are reduced to the extent that the individual becomes covered under a group health or dental plan providing comparable benefits. (9) In addition to the benefits shown, each named executive officer is entitled to receive outplacement services at the expense of the Company. While the amounts to be incurred by the Company for such services would be dependent on the terms and conditions of the services, we have estimated the fees at $7,500. Other than as described above or as set forth in the table above, we do not have any pension, change in control, severance or other post-termination plans or arrangements.

  51. CEO Pay Ratio

    CEO Pay Ratio As required by SEC rules, we are providing the following information about the relationship of the annual total compensation of our median employee (excluding our CEO) and the annual total compensation of Dominick Zarcone, our Chief Executive Officer (“CEO”) on December 31, 2023. The pay ratio provided below is a reasonable estimate calculated in accordance with SEC rules and methods for disclosure. Due to estimates, assumptions, adjustments, and statistical sampling permitted under the rules, pay ratio disclosures may involve a degree of imprecision and may not be consistent with the methodologies utilized by other companies. For 2023, the median of the annual total compensation of all our employees, other than our CEO, was $41,841; and the annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $12,189,021. As a result, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all our employees was approximately 291 to 1. We took the following steps to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO. 1.To identify the “median employee” from our employee population determined as of December 31, 2023, we used the amount of “gross wages” for the identified employees as reflected in our payroll records for 2023. For gross wages, we generally used the total amount of compensation the employees were paid before any taxes, deductions, insurance premiums, and other payroll withholding. We did not use any statistical sampling techniques. We annualized the compensation for employees who began employment after the start of the year. For compensation paid to our non-U.S. employees, we applied the U.S. dollar yearly average currency exchange rate to the local currency to facilitate comparison of all employees in U.S. dollars. 2.For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of SEC Regulation S-K.

  52. Pay Versus Performance

    Pay Versus Performance Provided below is the Company’s “pay versus performance” disclosure as required pursuant to Item 402(v) of Regulation S-K promulgated under the Exchange Act. As required by Item 402(v), we have included: •A list of the most important financial performance measures that in the Compensation and Human Capital Committee used in 2023 to link a measure of pay calculated in accordance with Item 402(v) (referred to as “compensation actually paid,” or “CAP”) to Company performance; •A table that compares the total compensation of our named executive officers (“NEOs”) as presented in the Summary Compensation Table (“SCT”) to CAP and that compares CAP to specified performance measures; and •Graphs that describe: ◦the relationship between our total shareholder return (“TSR”) and the TSR of the Dow Jones U.S. Auto Parts Index (“Peer Group TSR”); and ◦the relationships between CAP and our cumulative TSR, GAAP Net Income, and our Company-selected measure, Adjusted Diluted EPS. This disclosure has been prepared in accordance with Item 402(v) and does not necessarily reflect value actually realized by the executives or how our Committee evaluates compensation decisions in light of Company or individual performance. In particular, our Committee has not used CAP as a basis for making compensation decisions, nor does it use GAAP Net Income for purposes of determining incentive compensation. Please refer to our Compensation Discussion and Analysis on pages 26 to 40 for a discussion of our executive compensation program objectives and the ways in which we align executive compensation pay with performance. Performance Measures Used for Linking Pay and Performance The following is a list of performance measures, which in our assessment represent the most important performance measures used by the Company to link compensation actually paid to the NEOs for 2023. Each metric below is used for purposes of determining payouts under either our CIP or vesting of our PSU-2s. Please see the Compensation Discussion and Analysis for a further description of these metrics and how they are used in the Company’s executive compensation program.

  53. Pay Versus Performance

    | Adjusted Diluted EPS | | Organic Parts and Services Revenue Growth | | Free Cash Flow | | Return on Invested Capital | | EBITDA Dollars | | EBITDA Margin |

  54. Pay Versus Performance

    Adjusted Diluted EPS was selected as the Company-selected measure for the Pay versus Performance table that follows because this performance measure has the strongest alignment with the key attributes of our operating plan and drives the creation of long-term shareholder value. For more information on the calculation of adjusted diluted EPS, see footnote 8 to the Pay Versus Performance Table. Pay Versus Performance Table Below is the tabular disclosure for the Company’s President and Chief Executive Officer (“CEO”) (our Principal Executive Officer) and the average of our NEOs other than the CEO for 2023, 2022, 2021, and 2020.

  55. Pay Versus Performance

    | Year | Summary Compensation Table Total for CEO(1) | Compensation Actually Paid to CEO(2) | Average Summary Compensation Table Total for Other NEOs(3) | Average Compensation Actually Paid to Other NEOs(4) | Value of Initial Fixed $100 Investment Based on: | | GAAP Net Income ($ mil.)(7) | Adjusted Diluted EPS (8) | | | | | | | Total Shareholder Return(5) | Peer Group Total Shareholder Return(6) | | | | 2023 | $12,189,021 | $10,962,088 | $3,402,781 | $3,111,223 | $140 | $105 | $938 | $3.98 | | 2022 | $10,740,892 | $11,905,149 | $2,982,991 | $2,761,619 | $153 | $105 | $1,150 | $3.95 | | 2021 | $9,445,636 | $17,406,173 | $3,049,150 | $5,627,834 | $169 | $142 | $1,092 | $3.94 | | 2020 | $7,843,673 | $7,733,481 | $2,513,288 | $2,401,479 | $99 | $118 | $640 | $2.68 |

  56. Pay Versus Performance

    (1) The amounts reported in this column are the amounts of total compensation reported for our Chief Executive Officer, Dominick Zarcone, for each corresponding year in the “Total” column of the Summary Compensation Table. (2) CAP to our CEO is computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to SCT total compensation to determine the CAP values: Reconciliation of SCT to CAP for CEO

  57. Pay Versus Performance

    | Year | Summary Compensation Table Total for CEO | Minus Summary Compensation Table Value of Equity Granted to CEO | Plus Year-End Fair Value of Equity Granted During Fiscal Year that is Outstanding and Unvested at Year-End | Plus (Minus) Year-over-Year Change in Fair Value of Equity Granted in Prior Years that is Outstanding and Unvested at Year-End | Plus Fair Value at Vesting Date of Equity Granted and Vested During the Year | Plus (Minus) Change in Fair Value from Beginning of the Year to Vesting Date of Equity Granted in Any Prior Year that Vested During the Year | Minus Fair Value at Beginning of the Year of Equity Granted in Prior Year that was Forfeited During the Year | CEO CAP* | | 2023 | $12,189,021 | $(5,800,064) | $4,978,226 | $(273,069) | $— | $(132,026) | $— | $10,962,088 | | 2022 | $10,740,892 | $(5,000,075) | $5,564,237 | $1,513,443 | $— | $(913,348) | $— | $11,905,149 | | 2021 | $9,445,636 | $(4,200,026) | $6,584,867 | $3,622,781 | $— | $1,952,915 | $— | $17,406,173 | | 2020 | $7,843,673 | $(3,750,034) | $3,987,653 | $(36,312) | $— | $(311,499) | $— | $7,733,481 |

  58. Pay Versus Performance

    * The fair value of RSUs used to calculate CAP was based on LKQ’s closing stock price on each valuation date and includes the cash value of accrued dividends. The fair value of PSUs used to calculate CAP assumes estimated performance results as of the end of each reporting year for financial metrics (adjusted diluted EPS, organic parts and services revenue growth, and average ROIC, which were performance measures in our 2020, 2021, 2022, and 2023 PSU awards) and includes the cash value of accrued dividends. (3) For 2023, other NEOs are Mr. Galloway, Mr. Laroyia, Mr. Jude, and Mr. Hanley; for 2022 other NEOs are Mr. Galloway, Mr. Laroyia, Mr. Franz, Mr. Jude, Mr. Hanley, and Mr. McKay and for 2021 other NEOs are Mr. Laroyia, Mr. Franz, Mr. Jude, and Mr. Hanley. (4) Average CAP to our other NEOs is computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to SCT total compensation to determine the CAP values: Reconciliation of SCT to CAP for Other NEOs

  59. Pay Versus Performance

    | Year | Average Summary Compensation Table Total for Other NEOs | Minus Summary Compensation Table Value of Equity Granted to Other NEOs | Plus Year-End Fair Value of Equity Granted During Fiscal Year that is Outstanding and Unvested at Year-End | Plus (Minus) Year-over-Year Change in Fair Value of Equity Granted in Prior Years that is Outstanding and Unvested at Year-End | Plus Fair Value at Vesting Date of Equity Granted and Vested During the Year | Plus (Minus) Change in Fair Value from Beginning of the Year to Vesting Date of Equity Granted in Any Prior Year that Vested During the Year | Minus Fair Value at Beginning of the Year of Equity Granted in Prior Year that was Forfeited During the Year | Average Other NEOs CAP* | | 2023 | $3,402,781 | $(1,316,317) | $1,129,802 | $(89,585) | $— | $(15,458) | $— | $3,111,223 | | 2022 | $2,982,991 | $(1,354,239) | $1,286,551 | $241,235 | $6,692 | $(218,691) | $(182,920) | $2,761,619 | | 2021 | $3,049,150 | $(1,162,555) | $1,822,671 | $1,226,458 | $— | $692,110 | $— | $5,627,834 | | 2020 | $2,513,288 | $(1,162,538) | $1,205,190 | $(17,851) | $— | $(136,610) | $— | $2,401,479 |

  60. Pay Versus Performance

    * The fair value of RSUs used to calculate CAP was based on LKQ’s closing stock price on each valuation date and includes the cash value of accrued dividends. The fair value of PSUs used to calculate CAP assumes estimated performance results as of the end of each reporting year for financial metrics (adjusted diluted EPS, organic parts and services revenue growth, and average ROIC, which were performance measures in our 2020, 2021, 2022, and 2023 PSU awards) and includes the cash value of accrued dividends. (5) Represents the cumulative TSR of LKQ for an initial investment of $100 on December 31, 2019 through and including the end of the fiscal year for each row in the table. (6) Represents the cumulative TSR of the Dow Jones U.S. Auto Parts Index, which is an industry line peer group reported in the performance graph included in the Company’s 2023 Annual Report on Form 10-K, for an initial investment of $100 on December 31, 2019 through and including the end of the fiscal year for each row in the table. (7) LKQ’s GAAP Net Income as reported in the Company’s Consolidated Statements of Income on Form 10-K for each fiscal year in the table. (8) LKQ’s Adjusted Diluted EPS, which is the Company-selected measure, as calculated for purposes of our PSU-2s and Cash-based LTI for the applicable fiscal year. We define Adjusted Diluted EPS as GAAP Diluted EPS adjusted for certain items as specified by the Compensation and Human Capital Committee at the time the LTI targets were established. Such adjustments relate to currency exchange rates; asset impairments; restructuring and acquisition expenses; gains and losses related to acquisitions and divestitures; atypical environmental and legal losses; amortization expense of acquired intangibles; change in fair value of contingent consideration liabilities; results of discontinued operations; other extraordinary, unusual or infrequently occurring items; and certain other minor adjustments. Relationship between Company TSR and Peer Group TSR and CAP and Company TSR The graph below illustrate the relationship between our TSR and the Peer Group TSR, as well as the relationship between CAP and our TSR for the CEO and other NEOs. Relationship between CAP and GAAP Net Income The graph below reflects the relationship between the CEO and Average Other NEO CAP versus our GAAP Net Income for each fiscal year. GAAP net income is not used as a performance measure in any of our executive incentive plans. Relationship between CAP and Adjusted Diluted EPS (our Company-Selected Measure) The graph below reflects the relationship between the CEO and Average Other NEO CAP versus our Adjusted Diluted EPS for each fiscal year. Adjusted Diluted EPS is used as a performance measure in our cash-based LTI and PSU-2s.