Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Form of Long-Term Performance Agreement
On June 30, 2021, the Compensation and Governance Committee (the “Committee”) of the Board of Directors of Kimball Electronics, Inc. (the “Company”) approved the form of award agreement for performance shares to be awarded for fiscal year 2022 which contains an amended performance share calculation used to determine the amount of shares to be earned by and issued to each participant (the “Amendment”). The Company awards performance shares to officers and other key employees, including each of our Named Executive Officers (the “NEOs”).
Previously, the Committee based its calculation on a combination of (1) a bonus percentage attainment component, which was the three-year average bonus percentage computed under the Company’s profit sharing incentive bonus plan, and (2) a growth attainment component, which was a comparison of the Company’s three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR as determined by the Manufacturing Marketing Insider (“MMI”) Top 50 Index. The Committee amended the first component of the calculation to reflect a profitability attainment component that compares the Company’s actual operating income for the applicable fiscal years with the Company’s operating income plan for the applicable fiscal years as defined in the Company’s operating business plans. The Committee made no change to the second component.
The foregoing description is only a summary of the Amendment and is qualified in its entirety by reference to the Form of Long-Term Performance Share Agreement included as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Executive Severance and Change in Control Plan
Effective July 1, 2021, the Company terminated the employment agreements (the “Previous Agreements”) with our executive officers, including each of our NEOs, the form of which was filed with the Securities and Exchange Commission as Exhibit 10.1 to the Company’s Form 8-K on June 30, 2017. The Previous Agreements are superseded by the Kimball Electronics, Inc. Executive Severance and Change in Control Plan (the “Plan”).
The Plan is an unfunded employee welfare plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and is not a qualified plan under the Internal Revenue Code. As an unfunded plan, all benefits are paid out of the general assets of the Company and no participant will have any greater claim to any asset than other general creditors. The Company has not set aside or held any funds in trust to secure the benefits offered to participants under the Plan.
The Plan also supersedes any individual employment agreement, plan, program, guidelines, policy, or arrangements in effect for the executive officer for whom the severance benefits would be provided. However, if a change in control occurs within one year following the effective date of July 1, 2021, any provisions contained in the Previous Agreements that are more beneficial to the executive officer than the terms of the Plan shall control.
The Plan provides for severance benefits, including salary continuation, health coverage, cash bonus payout, outstanding equity vesting, and outplacement benefits. The amount of the benefits vary by the executive’s position and whether the severance is a result of a termination due to a change in control as that event is defined by the Plan.
The foregoing description is only a summary of the Plan and is qualified in its entirety by reference to the Kimball Electronics, Inc. Executive Severance and Change in Control Plan included as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.