RETENTION AND SEVERANCE AGREEMENT

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Exhibit 10.26

RETENTION AND SEVERANCE AGREEMENT

 THIS AGREEMENT, dated June 1, 2004, is made by and between ADESA, Inc., a Delaware corporation (the "Company"), and Brenda J. Flayton (the "Executive").

 WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of the Executive.

 NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

        1.     Defined Terms.     The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.

        2.     Term of Agreement.     The Term of this Agreement shall commence on the date hereof and shall continue in effect through June 1, 2009.

        3.     Company's Covenants Summarized.     In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Sections 4 and 7 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.

        4.     The Executive's Covenants.     The Executive agrees to abide by and perform the covenants set forth in Section 7 below.

        5.     Severance Payments.     

 If the Executive's employment is terminated during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, and David G. Gartzke is not the Chief Executive Officer of the Company upon the Date of Termination, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 5 ("Severance Payments"):

        (A)  In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash ("Cash Severance Payment"), equal to two times the sum of (i) the Executive's base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (ii) the Executive's target annual bonus under any annual bonus or annual incentive plan maintained by the Company in respect of the fiscal year in which occurs the Date of Termination or, if higher, the fiscal year in which occurs the first event or circumstance constituting Good Reason.

        (B)   Notwithstanding the foregoing provisions of this Section 5, the Company shall not be obligated to pay the Severance Payments to the Executive unless the Executive shall have signed a release of claims (other than with respect to claims arising under this Agreement, that certain letter from the Company to the Executive dated the date hereof, (the "Employment Letter") or any documents evidencing grants or awards of equity based compensation, existing rights to indemnification or coverage under the Company's liability

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insurance policies, and rights under the Company's benefits plans not inconsistent with the terms of this Agreement) in favor of the Company in a form to be prescribed by the Board, and all applicable rescission periods provided by law shall have expired. The Company shall pay the Cash Severance Payment to the Executive on or before the thirtieth day after the later of (i) the Date of Termination, (ii) the date of the Notice of Termination, and (iii) the date upon which the conditions set forth in this Section 5(C) are satisfied.

        6.     Termination Procedures.     

        6.1     Notice of Termination.     During the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.

        6.2     Date of Termination.     "Date of Termination," with respect to any purported termination of the Executive's employment during the Term shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Executive, shall not be less than fifteen (15) days from the date such Notice of Termination is given).

        7.     Covenants.     

        (A)     Nondisclosure.     The Executive acknowledges that he has received and will continue to receive and/or contribute to the production of confidential and proprietary information relating to the Company and its business, including but not limited to information regarding the Company's organization, finances, strategies, business or other plans, operations, advertising, marketing, product development, costs and pricing, employees, trade practices, research data, reports or records, and financial or other business information and information regarding the Company's past, current or potential customers, providers and suppliers, the use or disclosure of which might reasonably be construed to be contrary to the interests of the Company, or to place it at a competitive disadvantage ("Confidential Information"). The Company considers the Confidential Information to be integral to the operations and success of the Company, and the Executive understands and agrees that the Confidential Information is and shall remain the sole and exclusive property of the Company. During the Term and at all times thereafter, the Executive shall not use Confidential Information on his own behalf, or on behalf of any third party, or disclose any Confidential Information to other persons or entities except as is necessary for the performance of the Executive's duties with the Company or has been expressly permitted in writing by the Company; provided , however , the foregoing shall not apply to any information which is in or has entered the public domain (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). Upon termination of Executive's employment with the Company, Executive shall return to the Company all records, correspondence, compositions, articles, writing, programs, codes, devices, equipment, prototypes and other materials or documents (electronic, paper or otherwise) which incorporate, embody or disclose any Confidential Information (whether written, prepared or made by Executive or others) including all copies or memorializations thereof.

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        (B)     Injunctive Relief.     The Executive agrees that any breach of the foregoing Section 7(A) would result in immediate and irreparable injury to the Company. By reason thereof, the Executive agrees that if she were to breach, or threaten to breach, the foregoing Section 7(A), the Company shall be entitled to seek injunctive relief from any court of competent jurisdictio