KIMBALL INTERNATIONAL INC
10-Qs and 10-Ks
PROXIES
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant x | |
| Filed by a Party other than the Registrant o | |
| Check the appropriate box: |
| o Preliminary Proxy Statement | |
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| x Definitive Proxy Statement | |
| o Definitive Additional Materials | |
| o Soliciting Material Pursuant to §240.14a-12 |
Kimball International, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x No fee required. | |
| o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) Title of each class of securities to which transaction applies: |
| 2) Aggregate number of securities to which transaction applies: |
| 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) Proposed maximum aggregate value of transaction: |
| 5) Total fee paid: |
| o Fee paid previously with preliminary materials. |
| o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) Amount Previously Paid: |
| 2) Form, Schedule or Registration Statement No.: |
| 3) Filing Party: |
| 4) Date Filed: |
Table of Contents
KIMBALL
INTERNATIONAL, INC.
1600 Royal Street
Jasper, Indiana 47549
(812) 482-1600
1600 Royal Street
Jasper, Indiana 47549
(812) 482-1600
NOTICE
OF ANNUAL MEETING OF SHARE OWNERS
to
be held October 19, 2010
To the Share Owners of Kimball International, Inc.:
The annual meeting of the Share Owners of KIMBALL INTERNATIONAL,
INC., an Indiana corporation (the “Company”), will be
held at the principal offices of the Company, 1600 Royal Street,
Jasper, Indiana on Tuesday, October 19, 2010, at
9:30 A.M., Eastern Daylight Time (EDT), for the following
purposes:
1. To elect seven Directors of your Company.
2. To ratify the appointment of the Company’s
independent registered public accounting firm for fiscal year
2011.
3. To approve the Kimball International, Inc. 2010 Profit
Sharing Incentive Bonus Plan.
4. To consider and transact such other business as may
properly come before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
August 16, 2010, for determining our Share Owners entitled
to notice of and to vote at the meeting and any adjournments
thereof. Only Share Owners of record at the close of business on
that date will be entitled to vote. Voters of the shares of the
Company’s Class A Common Stock are entitled to elect
six Directors, consider and vote upon the ratification of the
Company’s independent registered public accounting firm,
approve the 2010 Profit Sharing Incentive Bonus Plan, and vote
upon all other matters properly presented at the meeting. Voters
of the shares of the Company’s Class B Common Stock
are entitled to elect one Director but are not otherwise
entitled to vote.
In accordance with the
e-proxy
rules adopted by the Securities and Exchange Commission that
permit companies to furnish proxy materials to their Share
Owners primarily via the Internet, on or about September 8,
2010, the Company mailed many of its Share Owners a Notice of
Internet Availability of Proxy Materials (the
“Notice”). On or about the same date, the Company
mailed a printed copy of its 2010 Annual Report to Share Owners,
proxy statement and a proxy card to its other Share Owners. On
the mailing date of the Notice, all Share Owners of record and
street name holders will have the ability to access all of the
Company’s proxy materials, including the 2010 Annual Report
to Share Owners and the proxy statement, via the Internet at
www.proxyvote.com.
If you have received a printed set of proxy materials, a proxy,
being solicited on behalf of the Board of Directors, has been
enclosed along with a return envelope, which requires no postage
if mailed in the United States. If you own shares of both
Class A Common Stock and Class B Common Stock, you
will receive one Notice, or if you have received a printed set
of proxy materials, you will receive Class A and
Class B proxy cards in a consolidated mailing.
By Order of the Board of Directors
John H.
Kahle, Secretary
September 8, 2010
YOUR VOTE IS
IMPORTANT!
WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE VOTE
PROMPTLY BY TELEPHONE OR THE INTERNET BY FOLLOWING THE
INSTRUCTIONS ON THE NOTICE OR THE PROXY CARD, OR IF YOU
RECEIVED A PRINTED SET OF PROXY MATERIALS, YOU MAY VOTE
BY SIGNING, DATING AND MAILING THE ACCOMPANYING PROXY CARD.
THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO
VOTE IF YOU ATTEND THE MEETING IN PERSON.
PROMPTLY BY TELEPHONE OR THE INTERNET BY FOLLOWING THE
INSTRUCTIONS ON THE NOTICE OR THE PROXY CARD, OR IF YOU
RECEIVED A PRINTED SET OF PROXY MATERIALS, YOU MAY VOTE
BY SIGNING, DATING AND MAILING THE ACCOMPANYING PROXY CARD.
THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO
VOTE IF YOU ATTEND THE MEETING IN PERSON.
Table of Contents
PLEASE NOTE THAT IF YOU DECIDE TO ATTEND IN PERSON, YOU
WILL BE ADMITTED ONLY ON THE FOLLOWING CONDITIONS:
A. PRESENTATION OF A PHOTO IDENTIFICATION, AND
B. YOUR NAME MUST BE ON OUR SHARE OWNER LIST OR A RECENT
BROKERAGE STATEMENT SHOWING SHARE OWNERSHIP AS OF
AUGUST 16, 2010, MUST BE PRESENTED.
DIRECTIONS TO THE ANNUAL MEETING OF SHARE OWNERS:
From Evansville, Indiana (via I-64 East):
Take exit 57 (US-231).
Go North on US-231 approximately 15 miles.
Turn right onto 15th Street.
Turn left onto Royal Street to arrive at the 1600 Royal Street Corporate Headquarters.
Go North on US-231 approximately 15 miles.
Turn right onto 15th Street.
Turn left onto Royal Street to arrive at the 1600 Royal Street Corporate Headquarters.
From Louisville, Kentucky (via I-64 West):
Take exit 63 (Highway 162).
Go North on Highway 162 approximately 12 miles.
At the intersection of Highway 162 and 3rd Avenue, proceed North on 3rd Avenue for 3 miles.
3rd Avenue becomes 3rd Street. Continue for 2 blocks.
Turn right onto Newton Street, which becomes US-231 Northbound.
Turn right onto 15th Street.
Turn left onto Royal Street to arrive at the 1600 Royal Street Corporate Headquarters.
Go North on Highway 162 approximately 12 miles.
At the intersection of Highway 162 and 3rd Avenue, proceed North on 3rd Avenue for 3 miles.
3rd Avenue becomes 3rd Street. Continue for 2 blocks.
Turn right onto Newton Street, which becomes US-231 Northbound.
Turn right onto 15th Street.
Turn left onto Royal Street to arrive at the 1600 Royal Street Corporate Headquarters.
From Indianapolis, Indiana (via Hwy 37 South):
Take Highway 37 South to Bedford.
In Bedford take US Highway 50 West to Loogootee approximately 30 miles.
In Loogootee take US 231 South to Jasper approximately 20 miles.
US 231 in Jasper is also called Newton Street.
Going Southbound on Newton Street, turn left onto 15th Street.
Turn left onto Royal Street to arrive at the 1600 Royal Street Corporate Headquarters.
In Bedford take US Highway 50 West to Loogootee approximately 30 miles.
In Loogootee take US 231 South to Jasper approximately 20 miles.
US 231 in Jasper is also called Newton Street.
Going Southbound on Newton Street, turn left onto 15th Street.
Turn left onto Royal Street to arrive at the 1600 Royal Street Corporate Headquarters.
TABLE OF
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Table of Contents
KIMBALL
INTERNATIONAL, INC.
1600 Royal Street,
Jasper, Indiana 47549
(812) 482-1600
1600 Royal Street,
Jasper, Indiana 47549
(812) 482-1600
ANNUAL
MEETING OF SHARE OWNERS
October 19, 2010
October 19, 2010
This Proxy Statement and the accompanying proxy are being
provided to the Share Owners of KIMBALL INTERNATIONAL, INC.
(“we,” “us,” “our” or the
“Company”) on or about September 8, 2010, and are
furnished in connection with the Board of Directors’
solicitation of proxies to be used at the Annual Meeting of
Share Owners to be held October 19, 2010, at the time and
place and for the purpose of considering and acting upon the
matters specified in the Notice of Annual Meeting of Share
Owners accompanying this Proxy Statement.
This year, we are again pleased to be furnishing our proxy
materials to our Share Owners via the Internet under the
e-proxy
rules adopted by the Securities and Exchange Commission
(“SEC”). As a result, on or about September 8,
2010, we mailed to many of our Share Owners a Notice of Internet
Availability of Proxy Materials (the “Notice”) instead
of a paper copy of this Proxy Statement and our 2010 Annual
Report. The Notice contains instructions on how to access those
documents and vote online. The Notice also contains instructions
on how each of those Share Owners can request and receive a
paper copy of our proxy materials, including this Proxy
Statement, our 2010 Annual Report and a proxy card. All Share
Owners who do not receive a Notice will receive a paper copy of
the proxy materials by mail unless they have previously
requested delivery of proxy materials electronically. Using this
distribution process conserves natural resources and reduces the
costs of printing and distributing these proxy materials.
This Proxy Statement, the form of the proxy card and voting
instructions are being made available to Share Owners on or
about September 8, 2010, at www.proxyvote.com. Our
2010 Annual Report is being made available at the same time and
by the same method. The 2010 Annual Report is not to be
considered as part of the proxy solicitation materials or as
having been incorporated by reference.
The SEC’s rules permit us to deliver a single Notice or set
of proxy materials to one address shared by two or more of our
Share Owners. This delivery method is referred to as
“householding” and can result in significant cost
savings. To take advantage of this opportunity, we have
delivered only one Notice or set of proxy materials to multiple
Share Owners who share an address, unless we received contrary
instructions from the impacted Share Owners prior to the mailing
date. We agree to deliver promptly, upon written or oral
request, a separate copy of the Notice or proxy materials, as
requested, to any Share Owners at the shared address to which a
single copy of those documents was delivered. If you prefer to
receive separate copies of the Notice or proxy materials,
contact Broadridge Financial Solutions, Inc. at
800-542-1061
or in writing at Broadridge Financial Solutions, Inc.,
Householding Department, 51 Mercedes Way, Edgewood, New York
11717. If you are currently a Share Owner sharing an address
with another Share Owner and wish to receive only one copy of
future Notices or proxy materials for your household, please
contact Broadridge at the above phone number or address.
Any of our Share Owners who properly deliver a proxy may revoke
their proxy at any time prior to the voting thereof by either
filing a written revocation with the Secretary of the Company,
submitting another properly delivered proxy by telephone, via
the Internet or by mail with a later date, requesting the return
of the proxy from the Secretary prior to the vote, or attending
the meeting and voting in person, although attendance at the
meeting will not by itself revoke a previously granted proxy.
The entire cost of soliciting proxies will be borne by your
Company. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone, and electronic mail
by Directors, Officers, and employees of your Company without
extra compensation. Your Company will also reimburse brokerage
houses, custodians, nominees, and fiduciaries for actual
expenses incurred in forwarding proxy material to beneficial
owners.
Table of Contents
Our 2010 Annual Report to our Share Owners, which includes our
Annual Report on
Form 10-K
as filed with the SEC for the fiscal year ended June 30,
2010, accompanies this Proxy Statement.
VOTING
INFORMATION
Only Share Owners of record at the close of business on
August 16, 2010, will be entitled to vote at the Annual
Meeting. On that date, there were outstanding
10,610,882 shares of Class A Common Stock and
27,100,483 shares of Class B Common Stock. Each share
of Class A Common Stock is entitled to one vote with
respect to the election of six Directors, the ratification of
the Company’s independent registered public accounting
firm, the approval of the 2010 Profit Sharing Incentive Bonus
Plan, and any other matters submitted to a vote at the meeting.
Each share of Class B Common Stock is entitled to one vote
with respect to the election of one Director but otherwise is
not entitled to vote.
The presence of a quorum requires that a majority of outstanding
shares of each class of Common Stock be present at the meeting
by proxy or in person. Withholding authority, abstentions and
“broker non-votes” will be counted as present for
purposes of determining the presence or absence of a quorum for
the transaction of business.
Recent changes in regulations were made to take away the ability
of banks or brokers to vote uninstructed shares in the election
of Directors on a discretionary basis. Thus, if you hold your
shares in street name and you do not instruct your bank or
broker how to vote in the election of Directors (Proposal 1
in this Proxy Statement), no votes will be cast on your behalf.
Banks and brokers will not have discretion to vote uninstructed
shares on the proposal to approve the Kimball International,
Inc. 2010 Profit Sharing Incentive Bonus Plan (Proposal 3
in this Proxy Statement). Your bank or broker will, however,
continue to have discretion to vote any uninstructed shares on
the ratification of the appointment of the Company’s
independent registered public accounting firm (Proposal 2
in this Proxy Statement). If you are a Share Owner of record and
you do not cast your vote, no votes will be cast on your behalf
on any of the items of business at the Annual Meeting.
With a quorum present at the meeting, Directors will be elected
by the plurality of the votes cast by the shares entitled to
vote in the election at the meeting (i.e., the nominees
receiving the highest number of votes cast in each category will
be elected). The election of Directors will not be affected if
you choose to not vote your shares or if you withhold authority
to vote your shares. The appointment of the Company’s
independent registered public accounting firm will be ratified
and approved if more shares of Class A Common Stock are
voted “FOR” the proposal than “AGAINST”.
Neither abstentions nor broker non-votes will affect the outcome
of this proposal. The 2010 Profit Sharing Incentive Bonus Plan
is subject to the approval requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”), which requires the
affirmative vote of a majority of the votes cast. In other
words, approval of the 2010 Profit Sharing Incentive Bonus Plan
will be determined where the number of shares voted
“FOR” the Plan exceeds the number of shares voted
“AGAINST” or “ABSTAIN”. Abstentions on a
specific proposal will be considered as present, but not as
voting in favor of such proposal. Abstentions will have the same
effect as a vote against the approval of the 2010 Profit Sharing
Incentive Bonus Plan. Broker non-votes will not affect the
determination of whether the 2010 Profit Sharing Incentive Bonus
Plan will be approved.
If you are a registered Share Owner, you can simplify your
voting and save your Company expense by voting via telephone or
the Internet. Instructions explaining how to vote by telephone
or Internet are provided on the Notice and the proxy card. These
documents include a control number to verify a Share
Owner’s identity, allowing the Share Owner to access online
proxy materials, vote the shares and confirm that the voting
instructions have been recorded properly. If you vote via
telephone or the Internet, please do not return a signed proxy
card. If your shares are held in the name of a bank or broker,
you may be able to vote via telephone or the Internet by
following the instructions on the Notice or proxy form you
receive from your bank or broker.
All properly delivered proxies will be voted. In the absence of
contrary direction, the proxies will be voted “FOR”
the election of each of the named nominees to the Board of
Directors, “FOR” the ratification of the appointment
of the Company’s independent registered public accounting
firm, and “FOR” the approval of the 2010 Profit
Sharing Incentive Bonus Plan. Shares held by participants in the
Company’s retirement plan will be voted in accordance with
the participant’s direction in his or her proxy unless such
proxy is not timely received, in which case the trustee of the
retirement plan will vote the shares in the same proportion as
the shares for which the trustee received timely participant
direction.
2
Table of Contents
The Board of Directors knows of no other matters that may come
up for action at the meeting. However, if any other matter
properly comes before the meeting, the persons named in the
proxy form will vote in accordance with their judgment on such
matter using the discretionary authority granted in the proxy
form.
SHARE
OWNER PROPOSALS
Proposals which are desired to be presented at the 2011 Annual
Meeting by Share Owners and included in the Company’s Proxy
Statement for that meeting must be received by the Company at
its principal executive offices, 1600 Royal Street, Jasper,
Indiana 47549, no later than May 11, 2011. Such proposals,
however, must meet certain requirements under the regulations of
the SEC to be included in the Company’s Proxy Statement. A
Share Owner wishing to bring a proposal before the 2011 Annual
Meeting of Share Owners (but not include the proposal in the
Company’s Proxy Statement), must cause written notice of
the proposal to be received by the Secretary of the Company at
its principal executive office no earlier than July 1,
2011, and no later than July 21, 2011. The written notice
must also meet additional requirements as stated in the
Company’s By-Laws, a copy of which is available upon
written request directed to the Secretary of the Company.
SHARE
OWNER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Share Owners may communicate with a member of the Board of
Directors by sending comments in care of the Secretary of the
Company at 1600 Royal Street, Jasper, Indiana 47549. The
Secretary has the discretion to forward the correspondence to
the Director, or if circumstances dictate, to other departments
within the Company to which such communication is more
appropriately addressed. A log of correspondence received and
copies of the correspondence are available to any Director who
wishes to review them.
SHARE
OWNERSHIP INFORMATION
Under the regulations of the SEC, persons who have power to vote
or invest in or dispose of shares of the Company, either alone
or jointly with others, are deemed to be beneficial holders of
such shares. Because the voting or investment power of certain
shares listed in the following table is shared, the same
securities in certain cases are listed opposite more than one
name in the table. The total number of shares of the Company
listed in the table for all executive officers and Directors as
a group, after elimination of such duplication, is
3,086,311 shares of Class A Common Stock (29.1% of the
outstanding) and 1,694,574 shares of Class B Common
Stock (6.1% of the outstanding), as of the date noted below.
Set forth in the following table are the beneficial holdings, as
of August 5, 2010, of the Company’s Class A
Common Stock and Class B Common Stock on the basis
described above for: (i) each person, known to your Company
who may be deemed to beneficially own more than 5% of either
class of your Company’s outstanding shares; (ii) each
Director; (iii) each “Named Executive Officer”
(NEO) as listed in the Summary Compensation Table appearing
later in this Proxy Statement; (iv) each Director Emeritus
and (v) all Directors and executive officers as a group:
| Shares Beneficially Owned(a)(b) | ||||||||||||||||
|
Sole Voting |
Shared |
|||||||||||||||
|
and |
Voting and |
|||||||||||||||
|
Investment |
Investment |
Percent |
||||||||||||||
|
Name
|
Power | Power | of Class | |||||||||||||
|
Holders of more than
5% of the Outstanding Shares of Either Class |
||||||||||||||||
|
Douglas A. Habig
|
Class A | 1,063,621 | (c) | 662,874 | 16.4 | % | ||||||||||
|
1600 Royal Street
|
Class B | 352,062 | (c) | 100,390 | 1.7 | % | ||||||||||
|
Jasper, Indiana 47549
|
||||||||||||||||
|
John B. Habig
|
Class A | 732,709 | 655,058 | 13.2 | % | |||||||||||
|
1500 Main Street
|
Class B | 385,431 | 72,756 | 1.7 | % | |||||||||||
|
Jasper, Indiana 47546
|
||||||||||||||||
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Table of Contents
| Shares Beneficially Owned(a)(b) | ||||||||||||||||
|
Sole Voting |
Shared |
|||||||||||||||
|
and |
Voting and |
|||||||||||||||
|
Investment |
Investment |
Percent |
||||||||||||||
|
Name
|
Power | Power | of Class | |||||||||||||
|
Barbara J. Habig
|
Class A | 965,212 | None | 9.2 | % | |||||||||||
|
4949 Lampkins Ridge Road
|
Class B | 90,922 | None | (d | ) | |||||||||||
|
Bloomington, Indiana 47401
|
||||||||||||||||
|
James C. Thyen
|
Class A | 586,232 | (c) | 103,952 | 6.5 | % | ||||||||||
|
1600 Royal Street
|
Class B | 258,424 | (c) | 137,003 | 1.5 | % | ||||||||||
|
Jasper, Indiana 47549
|
||||||||||||||||
|
Dimensional Fund Advisors, LP(e)
|
Class A | None | None | None | ||||||||||||
|
Palisades West, Building One
|
Class B | 2,226,778 | None | 8.2 | % | |||||||||||
|
6300 Bee Cave Road
|
||||||||||||||||
|
Austin, Texas 78746
|
||||||||||||||||
|
Donald Smith & Co., Inc.(f)
|
Class A | None | None | None | ||||||||||||
|
152 West 57th Street
|
Class B | 1,362,268 | None | 5.0 | % | |||||||||||
|
New York, NY 10019
|
||||||||||||||||
|
Directors (not listed
above), Directors Emeriti, and Named Executive Officers:
|
||||||||||||||||
|
Ronald J. Thyen
|
Class A | 261,918 | 96,136 | 3.4 | % | |||||||||||
| Class B | 171,388 | 109,369 | 1.0 | % | ||||||||||||
|
John T. Thyen
|
Class A | 317,554 | 96,136 | 3.9 | % | |||||||||||
| Class B | 25,695 | 109,369 | (d | ) | ||||||||||||
|
Dr. Jack R. Wentworth
|
Class A | None | None | None | ||||||||||||
| Class B | 16,116 | None | (d | ) | ||||||||||||
|
Christine M. Vujovich
|
Class A | None | None | None | ||||||||||||
| Class B | 15,034 | None | (d | ) | ||||||||||||
|
Harry W. Bowman
|
Class A | None | None | None | ||||||||||||
| Class B | 17,547 | None | (d | ) | ||||||||||||
|
Geoffrey L. Stringer
|
Class A | None | None | None | ||||||||||||
| Class B | 35,137 | None | (d | ) | ||||||||||||
|
Thomas J. Tischhauser
|
Class A | None | None | None | ||||||||||||
| Class B | 15,492 | None | (d | ) | ||||||||||||
|
P. Daniel Miller(g)
|
Class A | 3,320 | None | (d | ) | |||||||||||
| Class B | 147,704 | None | (d | ) | ||||||||||||
|
Donald D. Charron
|
Class A | 42,364 | (c) | None | (d | ) | ||||||||||
| Class B | 95,611 | (c) | None | (d | ) | |||||||||||
|
Robert F. Schneider
|
Class A | 4,916 | (c) | None | (d | ) | ||||||||||
| Class B | 113,346 | (c) | None | (d | ) | |||||||||||
|
John H. Kahle
|
Class A | 4,916 | (c) | 7,816 | (d | ) | ||||||||||
| Class B | 87,183 | (c) | 27,634 | (d | ) | |||||||||||
|
Gary W. Schwartz
|
Class A | 4,916 | (c) | None | (d | ) | ||||||||||
| Class B | 90,545 | (c) | None | (d | ) | |||||||||||
|
All executive officers, Directors,
|
Class A | 2,327,301 | (c) | 759,010 | 29.1 | % | ||||||||||
|
and Directors Emeriti as a Group (17 persons)
|
Class B | 1,484,815 | (c) | 209,759 | 6.1 | % | ||||||||||
| (a) | Based upon information obtained from the executive officers, Directors, and beneficial owners (according to the definition of “beneficial ownership” under the regulations of the SEC). Class A Common Stock is convertible at the option of the holder to Class B Common Stock on a share-for-share basis. Amounts are |
4
Table of Contents
| reported and percentages are calculated on an unconverted basis. On August 5, 2010, there were outstanding 10,532,116 shares of Class A Common Stock and 27,086,343 shares of Class B Common Stock. | ||
| (b) | The “Sole Voting and Investment Power” column includes shares owned by the spouse and children living in the household of the individuals listed. The “Shared Voting and Investment Power” column includes shares held by limited partnerships, foundations, and trusts over which listed individuals have shared voting and investment power. Beneficial ownership is disclaimed as to such shares and as to all other shares over which the named person does not have full beneficial rights. | |
| (c) | Class A shares include performance shares which are receivable as of August 5, 2010 and Class B shares include shares of Common Stock receivable by Directors and executive officers upon exercise of stock options which are exercisable within sixty days after August 5, 2010, respectively, as follows: Douglas A. Habig — 4,152 Class A shares and 181,000 Class B shares; James C. Thyen — 31,544 Class A shares and 142,500 Class B shares; Donald D. Charron — 7,981 Class A shares and 30,000 Class B shares; Robert F. Schneider — 4,916 Class A shares and 30,000 Class B shares; John H. Kahle — 4,916 Class A Shares and 30,000 Class B shares; Gary W. Schwartz — 4,916 Class A shares and 30,000 Class B shares; and all executive officers, Directors, and Director Emeriti, as a group — 65,991 Class A shares and 469,250 Class B shares. The percentage of Class A shares owned by each person, or group, is determined by including in the number of Class A shares outstanding, those performance shares issuable to such person or group as of August 5, 2010, and the percentage of Class B shares owned by each person, or group, is determined by including in the number of Class B shares outstanding, those Class B shares issuable to such person or group, assuming the exercise of stock options which are exercisable within sixty days after August 5, 2010. | |
| (d) | Totals are under one percent of the outstanding class of stock. | |
| (e) | This information is derived from the Schedule 13G/A filed by such Share Owner with the SEC on February 8, 2010, indicating beneficial ownership as of December 31, 2009, as updated by the Schedule 13F filed by such Share Owner with the SEC on May 7, 2010, indicating beneficial ownership as of March 31, 2010. The Share Owner is an investment adviser. | |
| (f) | This information is derived from the Schedule 13G filed by such Share Owner with the SEC on February 11, 2010, indicating beneficial ownership as of December 31, 2009, as updated by the Schedule 13F filed by such Share Owner with the SEC on May 13, 2010, indicating beneficial ownership as of March 31, 2010. The Share Owner is an investment adviser. | |
| (g) | The number of shares owned by Mr. Miller is as of his last Form 4 filing on March 5, 2010. He is no longer employed by the Company. |
5
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ELECTION
OF DIRECTORS
At the Annual Meeting, seven Directors, constituting the full
Board of Directors (“the Board”), are to be elected to
hold office until the next Annual Meeting of our Share Owners or
until their successors are duly elected and qualified. Holders
of shares of the Company’s Class A Common Stock are
entitled to elect six Directors, and holders of shares of the
Company’s Class B Common Stock are entitled to elect
one Director. Each nominee is currently serving as a Director of
the Company. Each nominee has consented to continue to serve as
a Director. If for any reason any such nominee shall become
unable or unwilling to serve, the proxies will be voted to fill
any vacancy so arising in accordance with the discretionary
authority of the persons named in the accompanying proxy. The
Board has no reason to believe that any such nominee will be
unable to serve.
Director
Qualifications
The rapidly changing business conditions and markets, in which
the Company operates, require a high-performance and committed
Board. It is necessary that individual Board members possess a
broad variety of experience, qualifications, attributes, and
skills. These include personal integrity, commitment to the
Company’s Vision and Guiding Principles, practical
judgment, broad complementary education, experience and
expertise in various areas such as sales and marketing,
international operations, finance and accounting, education,
government, manufacturing, compensation systems, human
resources, environmental regulation, financial markets, and
leadership. Unique individual qualifications and skills of our
nominees that led our Board to the conclusion that each should
serve as a Director are further described below. The nominees
are:
Nominees
for Election As Directors
By Holders of Class A Common Stock
By Holders of Class A Common Stock
|
Director |
||||||
|
Name
|
Information(a)
|
Since | ||||
|
Douglas A. Habig
|
Chairman of the Board of your Company; age 63; Mr. Habig’s tenure and experience as a long-serving Board member, Executive and former Chief Executive Officer give him unique insight into the culture and operations of the Company. | 1973 | ||||
|
James C. Thyen(b)
|
President and Chief Executive Officer of your Company; also Director of FM Global; age 66; Mr. Thyen’s tenure and experience with the Company as a Board member, Executive and former Chief Financial Officer provide a wealth of knowledge regarding the markets, finances, operations, and strategic direction of the Company. | 1982 | ||||
|
Christine M. Vujovich
|
Retired; Former Vice President, Marketing and Environmental Policy, Cummins, Inc.; age 58; Ms. Vujovich’s experience with operations in a major manufacturing company provides valuable knowledge of manufacturing systems and governmental regulation. | 1994 | ||||
|
Harry W. Bowman
|
Retired; Former President and Chief Executive Officer of The Stiffel Company; age 67; Mr. Bowman’s experience as the Chief Executive Officer of smaller, private manufacturing companies, as well as operating oversight of operations for a major appliance manufacturer, provides the Board with perspective on operations, marketing, and financial management. | 2000 | ||||
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|
Director |
||||||
|
Name
|
Information(a)
|
Since | ||||
|
Geoffrey L. Stringer
|
Retired; Former Executive Vice President, Bank One Corporation and Chief Executive Officer, Bank One Capital Corporation; age 67; Mr. Stringer’s lifelong career experience as a banker provides a significant breadth and depth of experience in general economics, capital markets, and financing. | 2003 | ||||
|
Thomas J. Tischhauser
|
Executive Consultant, Leadership Development; Former Corporate Vice President, Continental Automotive and Motorola, Inc.; age 52; Mr. Tischhauser’s broad experience in the electronics and consulting industries provides unique insight into the electronics markets from a global perspective. | 2008 | ||||
Nominee
for Election As Director
By Holders of Class B Common Stock
By Holders of Class B Common Stock
|
Director |
||||||
|
Name
|
Information(a)
|
Since | ||||
|
Dr. Jack R. Wentworth
|
Retired; Arthur M. Weimer Professor Emeritus of Business Administration, Indiana University; former Dean of the Kelley School of Business, Indiana University; age 82; Dr. Wentworth’s career in academia and tenure on the Board provides a wealth of knowledge in business administration, organizational theory and company culture to the Board’s deliberations. | 1984 | ||||
| (a) | Includes information each Director has given us about his or her age, positions held, principal occupation, and business experience for the past five years, and the names of other publicly-held companies of which he or she currently serves (or during the past five years has served) as a Director. | |
| (b) | Ronald J. Thyen and John T. Thyen, Director Emeriti, and James C. Thyen are brothers. John T. Thyen and Ronald J. Thyen assist the Board in its deliberations as non-compensated, non-voting Director Emeriti. |
The Board of Directors recommends a vote “FOR” the
election of each of the Director nominees.
INFORMATION
CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES
The Board consists of a majority of “independent
directors,” as defined by the listing standards of The
NASDAQ Stock Market LLC (“Nasdaq”) and the Board has
determined that such independent directors have no relationship
with the Company that would interfere with the exercise of their
independent judgment in carrying out the responsibilities of a
Director. The independent directors nominated for election are
Ms. Vujovich and Messrs. Bowman, Stringer,
Tischhauser, and Wentworth. The independent directors meet in
regularly scheduled executive sessions.
In determining Mr. Stringer’s independence, the Board
considered that Mr. Stringer is a small holder (0.6%) of
the common stock of XStream Systems (XStream), a former customer
of Kimball Electronics. Mr. Stringer also holds options to
purchase some shares of common stock of XStream. The Company
currently holds a $2.6 million unpaid judgment against
XStream for collection of debts payable to the Company which
were past due. Mr. Stringer is also a 50% holder of a
company (Catalyst Capital Investments, LLC) that provided
consulting services to XStream, but that consulting arrangement
was terminated on July 19, 2009.
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During fiscal year 2010, the Board met four times and each
Director then in office attended in excess of 75% of the
aggregate of the total number of meetings of the Board and the
total number of meetings held by all Committees of the Board on
which such Director served during his or her tenure. The Company
expects its Directors to attend all Board meetings, as well as
the Annual Meeting of Share Owners. All Directors attended the
last Annual Meeting of Share Owners held on October 20,
2009. Your Board currently has three standing committees: the
Audit Committee, the Strategic Planning Committee, and the
Compensation and Governance Committee.
The Audit Committee consists of three members of the Board:
Harry W. Bowman (Chairperson), Geoffrey L. Stringer and Thomas
J. Tischhauser. The Audit Committee met eight times during
fiscal year 2010. The Audit Committee operates under, and has
the responsibilities set forth in, a written charter, which has
been approved by the Board and is reviewed and reassessed
annually or as circumstances dictate by the Audit Committee. The
Audit Committee modifies the written charter, as necessary, to
comply with all regulatory requirements as or before they become
effective. A copy of the Audit Committee Charter is available on
the Company’s website at www.ir.kimball.com. The
Board has determined that Mr. Bowman is an “Audit
Committee financial expert” as defined by the rules of the
SEC. None of the Audit Committee members, including the Audit
Committee financial expert, are salaried employees of the
Company and, in the opinion of the Board, all meet the Nasdaq
and SEC requirements with respect to independence and accounting
experience.
The current members of the Strategic Planning Committee are:
Douglas A. Habig (Chairperson), James C. Thyen, Christine M.
Vujovich, Harry W. Bowman, and Geoffrey L. Stringer. Except for
Messrs. Habig and Thyen, each of the members of the
Strategic Planning Committee is “independent” as such
term is defined in the listing standards of Nasdaq and by SEC
rules. The responsibilities of the committee are the timely and
thorough review and evaluation of various strategies of the
Company as may be presented from time to time, with the goal of
making appropriate recommendations regarding such strategies to
the full Board for consideration
and/or
adoption by the Board as it determines to be in the best
interests of the Company’s Share Owners. The Strategic
Planning Committee did not meet during fiscal year 2010 because
all major strategic matters were considered by the full Board
during fiscal year 2010.
The current members of the Compensation and Governance Committee
are: Christine M. Vujovich (Chairperson), Dr. Jack R.
Wentworth, and Geoffrey L. Stringer. Each of the members of the
Compensation and Governance Committee is “independent”
as such term for compensation committee members is defined in
the listing standards of Nasdaq, each is a “non-employee
Director” as defined in
Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and each is an “Outside
Director” as defined by the regulations under
Section 162(m) of the Internal Revenue Code. The
committee’s responsibilities consist of making all
determinations with respect to the compensation of the Chairman
of the Board and Chief Executive Officer, reviewing and
approving the compensation of all other executive officers in
consultation with the Chief Executive Officer, approving awards
under the 2003 Stock Option and Incentive Plan, reviewing and
approving the Company’s contribution to its defined
contribution retirement plan, and approving targets,
certification of target achievement, and authorization of
payments under the Company’s Profit Sharing Incentive Bonus
Plan. See “Compensation Discussion and Analysis —
Compensation Process — Determining Compensation”
for a description of the role of executive officers and
compensation consultants in setting compensation for executive
officers. The Compensation and Governance Committee’s
responsibilities also include advising the Board in matters of
corporate governance, identification of individuals qualified to
be Board members, Board member evaluations, orientation, and
succession planning. The Compensation and Governance Committee
met four times during fiscal year 2010. A copy of the
Compensation and Governance Committee’s charter is
available on the Company’s website at
www.ir.kimball.com.
The Compensation and Governance Committee identifies potential
nominees for Director based on specified objectives in terms of
the composition of the Board, taking into account the need for
broad and complementary experience and expertise. Nominees,
whether recommended by the Compensation and Governance Committee
or a Share Owner, will be evaluated on the basis of established
Board member criteria, including, but not limited to: personal
integrity, practical judgment, willingness to think
independently, diverse experience and expertise, commitment to
your Company’s Vision and Guiding Principles, and
commitment to devote adequate time to Board duties and to serve
over a period of time sufficient to understand the
Company’s history, markets and business operations. The
Compensation and Governance Committee also considers diversity
of gender, race, national origin,
8
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education, and professional experience, which would enable a
nominee to bring a varied set of skills and backgrounds to bear
on the complicated issues which come before the Board.
The Compensation and Governance Committee also will consider
candidates recommended by Share Owners. A Share Owner who wishes
to recommend a Director candidate for consideration by the
Compensation and Governance Committee should send such
recommendation to the Secretary of the Company at 1600 Royal
Street, Jasper, Indiana 47549, who will forward it to the
Compensation and Governance Committee. Any such recommendation
should include a description of the candidate’s
qualifications for Board service, the candidate’s written
consent to be considered for nomination and to serve if
nominated and elected, and addresses and telephone numbers for
contacting the Share Owner and the candidate for more
information. A Share Owner who wishes to nominate an individual
as a Director candidate at the Annual Meeting of Share Owners,
rather than recommend the individual to the Compensation and
Governance Committee as a nominee, must comply with the advance
notice requirements mandated by the Company’s By-laws and
further explained in this Proxy Statement under “Share
Owner Proposals.”
The Board has an active role, as a whole, and also at the
committee level, in overseeing management of the Company’s
risks. The Board approaches the Company’s risk management
process in an intelligent manner based upon the fundamental
recognition that risk management in any business enterprise
requires an appropriate balance of two distinct aspects of risk:
| • | Value Preservation — recognizing and mitigating as much as possible the risk of potential for loss or harm to any element of our business. | |
| • | Value Creation — embracing the risks inherent in any business endeavor in order to reap the rewards of growth and profitability. |
The Board has identified distinct risk categories, recognizing
there is overlap of risks within each, and assigned oversight
responsibilities as follows:
|
Risk
|
Oversight
|
|
|
Financial and Operating
|
Board | |
|
Strategic Planning
|
Board | |
|
Reporting and Compliance
|
Audit Committee | |
|
Governance and Independence
|
Compensation and Governance Committee | |
|
Compensation
|
Compensation and Governance Committee |
The Board regularly reviews information regarding the
Company’s financial position, operating results, and
strategic plans, as well as risks associated with each. While
the Audit Committee and the Compensation and Governance
Committee are each responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board is
regularly informed through committee reports about such risks.
The Board currently separates the role of Chairman of the Board
from the role of Chief Executive Officer because the Board
believes this provides an efficient and effective leadership
model for the Company. Separating the Chairman of the Board and
Chief Executive Officer roles fosters clear accountability,
effective decision-making, and alignment on corporate strategy.
Separation of these roles strengthens corporate governance which
in turn strengthens risk management and thus leads to better
corporate performance. A critical role of the Board is to
supervise the Chief Executive Officer. Effective supervision
cannot happen if the Board is controlled by the very person it
is supposed to supervise. Because of the separation of the
Chairman of the Board and Chief Executive Officer positions, the
Board has determined it is not necessary, nor would it lead to
more effective corporate governance, to appoint a lead Director.
Compensation
and Governance Committee Interlocks and Insider
Participation
The members of the Compensation and Governance Committee during
fiscal year 2010 were Christine M. Vujovich (Chairperson),
Dr. Jack R. Wentworth and Geoffrey L. Stringer. None of the
Compensation and Governance Committee members have ever been
employed as an officer or employee of your Company or any of its
subsidiaries, and none of the Compensation and Governance
Committee members during fiscal year 2010
9
Table of Contents
were involved in a relationship requiring disclosure as an
interlocking executive officer/director or under Item 404
of
Regulation S-K.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that Company
Directors, executive officers and
greater-than-ten-percent
Share Owners file with the SEC and the Company an initial
statement of beneficial ownership and certain statements of
changes in beneficial ownership of Common Stock of the Company.
Based solely on its review of such forms received by the Company
and written representation from the Directors and executive
officers that no other reports were required, the Company is
unaware of any instances of noncompliance or late compliance
with such filings during the fiscal year ended June 30,
2010.
REVIEW
AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS
On an annual basis, each Director and executive officer is
obligated to complete a Director and Executive Officer
Questionnaire which requires disclosure of any transactions with
the Company in which the Director or executive officer or any
member of his or her immediate family has an interest. In
addition, any transactions with related persons or other
circumstances that present potential conflicts of interest are
to be reported to the Company’s compliance officer either
directly or through an anonymous reporting service. When
reported, the transactions or other conflicts are reviewed and
approved by the Compensation and Governance Committee, if in the
best interests of our Share Owners to do so. None of the Audit
Committee, the Compensation and Governance Committee, nor the
Board has formal written policies regarding its review and
approval of these types of transactions.
As approved by the Compensation and Governance Committee,
Christopher J. Thyen, son of Ronald J. Thyen, a Director
Emeritus, is employed by the Electronics group of the Company as
Vice President, Business Development. Kurt A. Vonderheide,
son-in-law
of James C. Thyen, a Director and President/Chief Executive
Officer, is employed by the travel services group of the Company
as Director of Corporate Travel & Guest Relations. In
such positions, both receive compensation in excess of $120,000.
Neither of them serves in a direct reporting relationship to
their father and
father-in-law,
respectively.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion and Analysis is intended to
supplement the more detailed information concerning executive
compensation that appears in the tables below. Our goal is to
provide our current and potential Share Owners and the investing
public with a better understanding of your Company’s
executive compensation practices and the decisions made
concerning the compensation payable to our executive officers,
including the persons named in the Summary Compensation Table
(our “NEOs”).
The Compensation and Governance Committee (the
“Committee”) of our Board plays a key role in
designing and administering your Company’s executive
compensation program. All principal elements of compensation
paid to our executive officers are subject to approval by the
Committee. The report of the Committee follows this Compensation
Discussion and Analysis.
Compensation
Philosophy
Your Company applies a consistent philosophy to compensation for
all employees, including management. The goal is to create
long-term Share Owner value by:
1. Rewarding Performance. All
parts of compensation are designed to reward executive
performance. Base salary is designed to reward annual
achievements, demonstrated leadership abilities, and management
experience and effectiveness. All other elements of compensation
focus on motivating the executive to achieve superior financial
results.
10
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2. Aligning with Share Owners’
Interest. Your Company’s objective is to
align the interests of the executives with our Share Owners by
strongly linking compensation to Company financial performance.
Improved Company performance leads to improved stock prices and
increased Share Owner value.
3. Retaining Executive
Talent. Your Company’s objective is to
retain our executives by using key elements of compensation that
provide substantial opportunity for financial rewards in
comparison to other professional opportunities.
Compensation
Process
Determining
Compensation
The Committee sets the President/Chief Executive Officer’s
(“CEO’s”) and Chairman of the Board’s
(“Chairman”) compensation and approves the
compensation of the other executive officers in consultation
with the CEO who directly supervises those executive officers
throughout the year. The Committee gives significant
consideration to the recommendation of the CEO, but the final
compensation decisions affecting our executive officers are
within the Committee’s discretion. No other roles are taken
by the executive officers in setting their compensation, except
for discussion of their individual performance with the CEO.
Judgment is used in making compensation decisions. Flexibility
is critical in the assessment process to allow for adjustments
due to new business conditions, and to adjust for the evolving
business environment. There is no predetermined formula for
allocating compensation between cash and non-cash, current and
long-term, or fixed and variable elements.
Key considerations affecting the determination of executive
compensation include:
1. Responsibilities — the scope and breadth of
the duties and level of responsibility undertaken.
2. Leadership — demonstrated ability to lead an
organization.
3. Performance — with an emphasis on consistent,
sustained performance.
4. Potential — demonstrated capacity to grow into
more responsible leadership positions.
5. Execution of Strategy — record of getting
things done according to plans.
6. Personal Development — demonstrated
willingness to learn and grow professional and leadership skills.
7. Promotion of Company Culture and Values —
demonstrated commitment to modeling of Company Mission and
Guiding Principles and ethical behavior.
8. Company Results — demonstrated teamwork and
support of Company goals and performance.
Neither the Company nor the Committee has any standing or
contractual arrangement with any compensation consultant for
review or recommendations regarding executive compensation.
During fiscal year 2010, the Committee did not use any surveys,
benchmark data or peer group comparisons in setting executive
compensation. Rather, the Secretary of the Company provided the
Committee with information that discussed executive compensation
at publicly traded companies generally. This information was
used as a reference by the Committee when making compensation
decisions.
Components
of Compensation
The following summarizes the components of compensation which
the Committee reviews on an individual executive and overall
basis to achieve our goal of creating long-term Share Owner
value.
Annual
Cash Compensation
1. Base Salary. Base salaries for
our NEOs are based upon the scope of their responsibilities,
their performance, the period over which they have performed
those responsibilities, and other subjective factors as noted in
the “Compensation Process — Determining
Compensation” section of this Compensation Discussion and
11
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Analysis. Decisions regarding salary increases or decreases take
into account the executive’s current salary and the amounts
paid to the executive’s peers within the Company. Base
salaries of the CEO and Chairman are reviewed as appropriate by
the Committee, usually in August, and the Committee makes
adjustments as it deems necessary. Base salaries of our other
executive officers are reviewed as appropriate by the CEO,
usually on an annual basis. Adjustments to the base salaries of
our other executive officers are recommended by the CEO and
approved by the Committee.
2. Cash Incentive
Compensation. Executive officers (except
Chairman Douglas A. Habig effective July 1, 2008) and
full-time salaried employees, except those covered under
commission compensation programs, are eligible to participate in
the Kimball International, Inc. Profit Sharing Incentive Bonus
Plan (the “Incentive Bonus Plan”) which provides
participants with an opportunity to receive a cash payment if
certain profitability levels (tiers) for the fiscal year are
achieved. The Incentive Bonus Plan measures profitability at
three levels within the Company: (1) Worldwide for
Company-wide performance (“Worldwide”); (2) at a
Group level for certain combinations of Business Units
(“Group”); and (3) at a Business Unit level for
the performance of designated operations within the Company
(“Business Unit”).
The goal of the Incentive Bonus Plan is to link compensation
with the long-term financial success of the Company.
The Incentive Bonus Plan establishes potential cash incentive
amounts as a range of percentages of the participant’s
salary, with the payout percentage increasing with higher levels
of profitability. The Incentive Bonus Plan also establishes
different payout percentage ranges across several participant
categories, setting higher payout percentage ranges for
participants who, by virtue of their responsibilities, are
expected to have a greater effect on the Company’s
profitability. The following matrix summarizes the cash
incentive payout percentages at each economic profit tier for
the various participant categories:
|
Economic Profit |
Participant Categories
|
|||||||||||||||||||||||||||||||||
|
Tiers
|
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | ||||||||||||||||||||||||||
| 1 | 100 | % | 80 | % | 60 | % | 50 | % | 40 | % | 30 | % | 20 | % | 10 | % | ||||||||||||||||||
| 2 | 80 | % | 60 | % | 45 | % | 35 | % | 30 | % | 22 | % | 15 | % | 7 | % | ||||||||||||||||||
| 3 | 60 | % | 40 | % | 30 | % | 25 | % | 20 | % | 15 | % | 10 | % | 5 | % | ||||||||||||||||||
| 4 | 40 | % | 20 | % | 15 | % | 12 | % | 10 | % | 7 | % | 5 | % | 3 | % | ||||||||||||||||||
| 5 | 20 | % | 10 | % | 8 | % | 6 | % | 5 | % | 4 | % | 3 | % | 2 | % | ||||||||||||||||||
| 6 | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||||||
For a particular fiscal year, the Committee sets each tier to a
specific amount of economic profit. Economic profit is equal to
the amount of net income less the cost of capital. The cost of
capital represents the economic cost of a reasonable return on
capital that is used in the business. New capital expenditures
are excluded in computing the cost of capital for an appropriate
period of time (currently 24 months) to encourage needed
capital investments. Separate economic profit tiers are set for
Worldwide, Group, and Business Unit plans. The Worldwide and
Group economic profit tiers are set by the Committee after
considering many factors, including comparisons to economic
performance data gathered by the Company of numerous public
companies. The economic profit tiers for the Worldwide, Group
and Business Unit levels are established so that performance
attained between the tier 4 and tier 3 levels
approximates the median economic profitability performance of
these public companies. Achievement of a 100% cash incentive
payout for NEOs is very difficult because the Incentive Bonus
Plan is designed to pay maximum cash incentives only if the
Company achieves economic profitability near the top quartile of
these public companies. The Committee must approve the economic
profit tiers within 90 days after the commencement of each
fiscal year. The Committee may, within such
90-day time
period, make adjustments for non-operating income and loss and
other profit-computation elements as it deems appropriate to
provide optimal incentives for eligible employees. For
adjustments beyond the
90-day
period, NEOs are not eligible to receive cash incentive
compensation resulting from the adjustments.
The NEOs are in participant category 1 and thus may earn cash
incentives anywhere from zero up to 100 percent of base
salary. The Company has set the target cash incentive for the
NEOs at approximately 40% (tier 4 level) which is a cash
incentive payout reflecting the Company’s desired level of
compensation at risk. During fiscal
12
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year 2010, Messrs. Thyen, Schneider, Kahle, and Schwartz
participated at the Worldwide level, while Mr. Charron
participated at the Electronics Group level, and Mr. Miller
participated at the Furniture Group level until his termination
without cause in March 2010. For the past five years, cash
incentive payouts averaged 27% for the Worldwide plan, 20% for
the Electronics Group plan, and 39% for the Furniture Group plan.
A participant’s total cash incentive under the Incentive
Bonus Plan may not exceed $1,000,000 for any fiscal year.
At the end of each fiscal year, but before cash incentives under
the Incentive Bonus Plan may be paid, the Committee determines
the actual economic profit that was achieved and approves the
payment of the cash incentive. The Committee does not have the
discretion to increase, but can decrease, the amount of any cash
incentive for the NEOs under the Incentive Bonus Plan. There
were no decreases in fiscal year 2010.
Cash incentives earned under the Incentive Bonus Plan for a
particular fiscal year are accrued annually and paid in five
installments over the succeeding fiscal year with 50% payable in
August and 12.5% payable in each of the following months of
September, January, April, and June. Cash incentives totaling
less than $2,000 are paid in a lump sum in August. Except for
provisions relating to retirement, death or permanent
disability, and certain other circumstances described in a
participant’s employment agreement, participants must be
actively employed on each payment date to be eligible to receive
any unpaid installments. If a participant’s termination of
employment is caused by retirement, death or disability, or
certain other circumstances described in a participant’s
employment agreement, the participant (or beneficiary, in the
event of the participant’s death) will be entitled to
receive all cash incentive payments for the previous fiscal year
and a pro-rata share for the current fiscal year, all to be paid
in full within
21/2
months after the end of the Company’s fiscal year.
Because special situations occur where individual achievement
may not be adequately recognized under this single incentive
plan, the Committee, at the beginning of each fiscal year,
grants authority to the Chairman
and/or CEO
to distribute additional discretionary cash
and/or stock
compensation up to an aggregate maximum amount to eligible
participants for each particular fiscal year. For fiscal year
2011, the aggregate amount of cash compensation approved by the
Committee was $500,000, and the maximum number of shares
approved by the Committee was 600,000 shares of
Class A or Class B Common Stock. The stock
compensation may be in the form of performance share award
opportunities
and/or
outright grants of shares of Common Stock, all to be awarded
under the Company’s 2003 Stock Option and Incentive Plan
(the “2003 Plan”). Discretionary compensation is
awarded based upon individual effort and is paid in amounts and
at such times as the Chairman
and/or CEO
determine, in their sole discretion. No employee has a
guaranteed right to discretionary compensation in the event that
performance targets are not met or if the Share Owners do not
approve the 2010 Profit Sharing Incentive Bonus Plan. Eligible
participants include any employee of the Company, excluding the
Chairman and CEO for cash or stock compensation, and excluding
executive officers of the Company pursuant to Section 16 of
the Exchange Act for stock compensation.
Stock
Compensation
The 2003 Plan permits a variety of stock incentive benefits
consisting of: restricted stock, restricted share units,
unrestricted share grants, incentive stock options,
non-qualified stock options, stock appreciation rights,
performance shares, and performance units. The Committee granted
performance shares during fiscal year 2010. No other form of
award has been granted to NEOs since July 2005 because of the
Committee’s view that performance shares represent one of
the more effective forms of stock incentive compensation
available under the 2003 Plan by tying compensation directly to
the economic profitability of the Company.
1. Performance Shares
Performance shares include both an annual performance share
(“APS”) award and a long-term performance share
(“LTPS”) award with one-fifth (1/5) of the award
vesting annually over the succeeding five-year period. These
awards are approved by the Committee at the beginning of each
fiscal year. The performance share awards set forth the maximum
number of shares of your Company’s stock which the
participant is eligible to receive if the applicable
profitability levels for the fiscal year have been achieved. The
maximum number of shares awarded to each NEO is determined by
the Committee based upon the relative level of operational
responsibilities of the NEOs for their
13
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respective business segment and the overall company, as well as
the other subjective factors noted in the “Compensation
Process — Determining Compensation” section of
this Compensation Discussion and Analysis. The maximum number of
shares awarded for fiscal year 2011 to each of the NEOs is
disclosed in the “NEOs’ Compensation — Other
NEO Compensation” section of this Compensation Discussion
and Analysis. For the APS award, the number of shares of your
Company’s stock that the NEO actually receives under the
award is determined by multiplying (x) the NEO’s
payout percentage calculated under the Incentive Bonus Plan for
the performance year by (y) the maximum number of shares
set forth in the award. In order to determine the number of
shares that the NEO actually receives under the LTPS award, the
NEO’s payout percentage (using the Worldwide level payout
percentage for all NEOs) calculated under the Incentive Bonus
Plan for the performance year is converted to a LTPS payout
percentage according to the following table:
|
Incentive Bonus Plan Payout |
||
|
Percentage
|
LTPS Payout Percentage
|
|
|
40% - 100%
|
100% | |
|
0 - 39%
|
Incentive Bonus Plan Payout Percentage ¸ 40% |
The resulting percent is multiplied by the maximum number of
shares eligible to be received in the applicable fiscal year.
For the past five years, the shares ultimately earned for APS
awards have averaged approximately 27% of the shares awarded for
the Worldwide plan, 20% for the Electronics Group plan, and 39%
for the Furniture Group plan for the NEOs. Shares ultimately
earned for LTPS awards, which use the Worldwide level payout
percentage for all NEOs, have averaged approximately 57% of the
shares awarded for the past five years.
The APS award acts as an incentive to drive higher profits on a
shorter-term annual basis. The LTPS award acts as an incentive
for longer term stock price appreciation by driving higher
profits, which creates higher cash incentive percentages and
greater payouts to the participants. The NEOs have no voting or
dividend rights with respect to the performance shares until
earned.
2. Restricted Share Units
Prior to July 2005, Restricted Share Units (“RSU”)
were awarded to NEOs under the 2003 Plan. No RSUs are currently
outstanding, as the remaining outstanding awards vested during
fiscal year 2010. The RSUs vested five years after the date of
award. Upon vesting, the outstanding number of RSUs and the
value of dividends accumulated over the vesting period were
converted to shares of Class A Common Stock. If the
employment of a holder of an RSU terminated before the RSU
vested for any reason other than death, retirement at
age 62 or older, total permanent disability, or certain
other circumstances described in the Company’s employment
policy, the RSU was forfeited.
3. Stock Options
The NEOs also have stock options outstanding under a former
stock incentive plan, the 1996 Stock Incentive Program, all of
which were granted prior to July 2005. No shares remain
available for new grants under this plan. Options outstanding
are all exercisable and expire ten years after the date of
grant. Stock options are forfeited when employment terminates,
except in the case of retirement at age 62 or older, death,
permanent disability, or certain other circumstances described
in the Company’s employment policy. None of these awards
were
in-the-money
as of June 30, 2010.
Retirement
Plan
The NEOs participate in a defined contribution,
participant-directed retirement plan with a 401(k) provision
that all domestic employees are eligible to participate in (the
“Retirement Plan”). The Retirement Plan is intended to
attract employees and promote employee retention by providing a
long-term savings opportunity. The Retirement Plan provides for
voluntary employee contributions as well as a discretionary
annual Company contribution as determined by the Committee. The
total Company contribution is allocated based upon the total
eligible compensation of eligible participants. Each eligible
participant’s Company contribution percentage is identical,
including NEOs. The Company contribution is linked to Company
profitability with certain minimum and maximum limits as
determined annually by the Committee. The Company’s
contribution percentage for fiscal year 2010 was approximately
3% of eligible compensation, up to the annual compensation limit
under
14
Table of Contents
Section 401(a) of the Internal Revenue Code. Participant
contributions are fully vested immediately and Company
contributions are fully vested after five years of participation
according to the following schedule.
|
Years of Vesting Service
|
Vested Percentage | |||
|
Less than 1
|
0 | % | ||
|
1
|
10 | % | ||
|
2
|
20 | % | ||
|
3
|
40 | % | ||
|
4
|
60 | % | ||
|
5
|
100 | % | ||
All NEOs are fully vested. The Retirement Plan is fully funded
and participants may choose to invest their balances among any
combination of the following investment options. The annual
return of each Fund for the year ended June 30, 2010, is
parenthetically noted.
|
Stable Value Fund
|
Vanguard Retirement Savings Trust (2.89%) | |
|
Bond Fund
|
Vanguard Total Bond Market Index (9.28%) | |
|
Income Balanced Fund
|
Vanguard LifeStrategy Income Fund (11.23%) | |
|
Conservative Balanced Fund
|
Vanguard LifeStrategy Conservative Growth Fund (12.41%) | |
|
Moderate Balanced Fund
|
Vanguard LifeStrategy Moderate Growth Fund (13.45%) | |
|
Aggressive Balanced Fund
|
Vanguard LifeStrategy Growth Fund (14.21%) | |
|
S&P 500 Index Fund
|
Vanguard 500 Index Fund, Investor Shares (14.33%) | |
|
Large Cap Value Fund
|
Vanguard Windsor II Fund, Investor Shares (13.11%) | |
|
Large Cap Growth Fund
|
American Funds Growth Fund of America, R-5 Shares (10.73%) | |
|
Small Cap Growth Fund
|
Vanguard Explorer Fund (20.28%) | |
|
Small Cap Value Fund
|
Artisan Small Cap Value Fund (23.65%) | |
|
Real Estate Fund
|
Vanguard REIT Index Fund (54.95%) | |
|
International Fund
|
Vanguard International Growth Fund (11.86%) | |
|
Company Stock Fund
|
Kimball International Stock Fund (−9.05%) |
For those eligible employees who, under the 1986 Tax Reform Act,
are deemed to be highly compensated, their individual Company
contribution under the Retirement Plan is reduced. See
“Nonqualified Deferred Compensation” below.
Nonqualified
Deferred Compensation
For NEOs and other executive officers who are deemed to be
highly compensated under the 1986 Tax Reform Act, there is a
fully-funded, nonqualified, Supplemental Employee Retirement
Plan (“SERP”) under which your Company contributes to
the account of each participant an amount equal to the reduction
in their Company contribution under the Retirement Plan arising
from the provisions of the 1986 Tax Reform Act. In addition,
participants may voluntarily defer up to 25% of their eligible
compensation under the SERP. A participant’s deferrals are
fully vested. Company contributions are subject to the same
vesting schedule as the Retirement Plan, and are made within
21/2
months after the end of the fiscal year. The Company’s
contribution percentage for fiscal year 2010 was approximately
3% of eligible compensation in excess of the annual compensation
limit under Section 401(a) of the Internal Revenue Code.
Investment options are the same as those under the Retirement
Plan except for the exclusion of the Stable Value and Company
Stock Funds and the addition of a Money Market Fund. Payments of
a participant’s elective deferrals and Company
contributions are made as elected by the participant in lump sum
or in installment payments over a period of 5 or 10 years.
These amounts may be paid earlier in the event of a termination
of employment, death of the participant, or an unforeseen
emergency affecting the participant as determined by the
committee appointed to administer the SERP. The SERP is intended
to promote retention by providing a long-term savings
opportunity on a tax-efficient basis. The assets of the SERP are
held in what is commonly referred to as a “rabbi
trust” arrangement. This means that the assets of the SERP
are subject to the
15
Table of Contents
claims of the Company’s general creditors in the event of
the Company’s insolvency. For more information about
amounts deferred by the NEOs, see the Nonqualified Deferred
Compensation Table in this Proxy Statement.
Other
Compensation
The Company provides the NEOs with other benefits, which the
Committee believes are reasonable, competitive and consistent
with the Company’s overall compensation program directives.
They are designed to promote the executives’ physical and
mental well-being in order to help them function more
effectively in their respective positions.
These benefits and the rationale for providing each are as
follows:
|
Benefit
|
Rationale
|
|
|
Financial Counseling
|
Aid personal financial planning through expert advice to properly manage financial affairs. | |
|
Tax Preparation
|
Assist in accurate preparation of personal income tax filings. | |
|
Executive Preventive Healthcare Program
|
Maintain health of executive and primary personal support person to permit peak performance. | |
|
Medical Reimbursement
|
Promote seeking of proper medical care by reducing potential financial barriers. |
No loans of Company funds have ever been made to any executive
officer for any purpose. The NEOs may periodically use the
Company aircraft for limited personal reasons, with the
appropriate amount being included in their taxable income. The
exact amounts received from these benefits are not predetermined.
Employment
and Severance Agreements
The Company has entered into written employment agreements with
each of the NEOs. These employment agreements were intended to
bring the Company more in line with competitive practices within
the industries in which it operates and were designed to enhance
the retention of executives and protect the interests of the
Company by way of covenants not to compete. The agreements do
provide for acceleration of certain benefits and payment of
severance in certain circumstances, as more fully described in
the “Executive Officer and Director
Compensation — Employment Agreements with NEOs and
Potential Payments Upon Termination or
Change-In-Control”
section of this Proxy Statement.
Compensation
Related Risk Assessment
The Board believes that risks arising from our compensation
policies and practices for our employees are not reasonably
likely to have a material adverse effect on the Company. In
addition, the Committee believes that the mix and design of the
elements of executive compensation do not encourage management
to assume excessive risks.
The Committee extensively reviewed the elements of executive
compensation to determine whether any portion of executive
compensation encouraged excessive risk taking and concluded:
| • | the Incentive Bonus Plan’s focus on the long-term financial success of the Company, as well as the payout over subsequent fiscal years, discourages short-term risk taking; | |
| • | incentive bonus plan profitability tiers are appropriately set to calibrate payouts at the targeted cash incentive level to the median levels of peer group performance; | |
| • | performance share awards are appropriately linked to profitability; and | |
| • | equity ownership guidelines discourage excessive risk taking. |
16
Table of Contents
Furthermore, as described in the “Determining
Compensation” section of this Compensation Discussion and
Analysis, compensation decisions include judgment, which
mitigates the influence of purely objective calculations on
excessive risk taking. The Committee reviews the Company’s
compensation policies and practices on an annual basis to
consider how effectively the policies and practices are
providing incentives at an appropriate level of risk to
executive employees.
NEOs’
Compensation
The annual compensation of the NEOs is based upon the process
described in the “Compensation Process” section of
this Compensation Discussion and Analysis and consists of
components as delineated in the “Components of
Compensation” section. The Committee does not utilize any
specific target or formula for the NEOs’ total compensation.
Given the current economic circumstances and the global
liquidity crisis which continued during the Company’s
fiscal year 2010, the Committee reviewed carefully the impact of
these conditions on the compensation of the NEOs. Overall, base
salaries remained relatively flat with fiscal year 2009, due to
the slow to non-existent recovery of the Company’s business
during fiscal year 2010.
Overall incentive compensation, including the amount earned
under the Incentive Bonus Plan and performance shares, was
higher than fiscal year 2009 but was still significantly below
earnings levels of fiscal years prior to fiscal year 2009. The
Committee determined that the lower level of incentive
compensation was aligned with the design and objectives of the
incentive compensation programs.
Other actions taken by the Committee during fiscal year 2010
were as follows:
|
Date
|
Action(s)
|
|||
|
August 2009
|
• | Awarded APS and LTPS share opportunities for fiscal year 2010. | ||
| • | Certified fiscal year 2009 economic profit results, resulting in issuance of APS and LTPS shares and Incentive Bonus Plan payments. | |||
| • | Reviewed and approved adjusted compensation of NEOs. | |||
|
August 2010
|
• | Awarded APS and LTPS share opportunities for upcoming fiscal year 2011. | ||
| • | Certified fiscal year 2010 economic profit results, resulting in issuance of APS and LTPS shares and Incentive Bonus Plan payments. | |||
| • | Reviewed and approved adjusted compensation of NEOs. |
The rationale and impact of each of these actions on individual
NEO compensation is as follows:
James C. Thyen, President and CEO
The Committee independently reviewed the performance of the CEO.
All of the key considerations noted in the “Compensation
Process — Determining Compensation” section of
this Proxy Statement were considered heavily in the
Committee’s deliberations along with general background
information regarding market salary data provided by the
Company’s Secretary. Based upon this thorough review, and
in light of the 10% reduction in base salary taken by the CEO in
February 2009, the Committee determined that a salary increase
was warranted for the CEO. The committee approved a salary
increase from an annualized base salary of $810,836 to $879,996.
He was awarded, under the 2003 Plan, an APS award applicable to
fiscal year 2011 performance for a maximum of
143,000 shares of Class A Common Stock and a LTPS
award applicable to performance periods beginning in fiscal year
2011 for a maximum of 183,000 shares of Class A Common
Stock. Based upon the fiscal year 2010 economic profit results,
Mr. Thyen will also receive a payout of 8% of his base
salary under the Incentive Bonus Plan, and 11,440 and
20,104 shares of Class A Common Stock based on prior
APS and LTPS grants, respectively.
17
Table of Contents
Other NEO Compensation
At its August 2010 meeting, in consultation with the CEO, the
Committee reviewed and approved the compensation of
Messrs. Schneider, Charron, Kahle, and Schwartz.
The following table summarizes the compensation decisions made
by the Committee at its August 2010 meetings:
|
FY 2011 |
FY 2011 |
FY 2010 |
FY 2010 |
FY 2010 |
Incentive |
|||||||||||||||||||||||
|
APS |
LTPS |
APS |
LTPS |
Discretionary |
Bonus Plan |
|||||||||||||||||||||||
|
Award |
Award |
Grant |
Grant |
Bonus |
Payout (% of |
|||||||||||||||||||||||
|
Annualized |
(maximum # |
(maximum # |
(shares |
(shares |
Payout |
FY 2010 |
||||||||||||||||||||||
| Base Salary ($) | of Shares) | of shares) | issued)(1) | issued)(1) | ($) | Base Salary) | ||||||||||||||||||||||
|
James C. Thyen
|
879,996 | 143,000 | 183,000 | 11,440 | 20,104 | 0 | 8 | % | ||||||||||||||||||||
|
Robert F. Schneider
|
421,564 | 7,500 | 30,300 | 600 | 4,316 | 33,000 | 8 | % | ||||||||||||||||||||
|
Donald D. Charron
|
520,728 | 7,500 | 26,300 | 2,025 | 5,956 | 10,000 | 27 | % | ||||||||||||||||||||
|
John H. Kahle
|
354,120 | 7,500 | 29,300 | 600 | 4,316 | 27,000 | 8 | % | ||||||||||||||||||||
|
Gary W. Schwartz
|
284,180 | 7,500 | 28,300 | 600 | 4,316 | 22,000 | 8 | % | ||||||||||||||||||||
| (1) | Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations. |
Tax and
Accounting Considerations
Section 162(m)
The Committee has also considered the potential effect of
Section 162(m) of the Internal Revenue Code, which limits
the deductibility of non-performance-based executive
compensation in excess of $1,000,000 paid to NEOs covered under
the law. APS and LTPS awards and cash incentives paid under the
Incentive Bonus Plan are designed to be deductible when they are
paid to the NEOs because they meet the definition of qualified
performance-based compensation under Section 162(m).
Compensation paid to the NEOs during fiscal year 2010 which was
not considered performance-based compensation includes base
salaries, discretionary cash compensation, perquisites, and
income from the issuance of vested RSUs and related dividend
equivalents which had been granted prior to fiscal year 2006.
The Committee will continue to monitor your Company’s
compensation program in relation to Section 162(m).
Section 409A
Section 409A of the Internal Revenue Code affects the
payments of certain types of deferred compensation to key
employees and includes requirements relating to when payments
under such arrangements can be made, acceleration of benefits,
and timing of elections under such arrangements. Failure to
satisfy these requirements will generally lead to an
acceleration of the timing for including deferred compensation
in an employee’s income, as well as certain penalties and
interest. The Company intends for, but does not currently
require, its nonqualified deferred compensation arrangement to
meet the effective requirements of Section 409A.
Recovery
of Compensation from Executive Misconduct
If the Company determines that an executive officer has engaged
in fraudulent or intentional misconduct, resulting in a
restatement of the Company’s financial results, the Company
would take all possible actions to recover any portion of
performance-based or incentive compensation paid or awarded to
the executive that is greater than would have been paid or
awarded if calculated based on the restated financial results.
18
Table of Contents
Share
Ownership Guidelines
In 1997, your Company established stock ownership guidelines for
directors, NEOs and other senior executives. The guidelines were
updated in 2007. The current guidelines outline the expectations
of directors and executives to maintain beneficial ownership of
Company stock having a value expressed as a multiple of their
director fees or their base salary, as the case may be, for as
long as they remain a director or executive officer.
“Beneficial Ownership” includes, in addition to shares
held directly by directors or executives, those shares held by a
spouse, minor children or grandchildren, trusts, retirement
plans and unearned shares awarded under the 2003 Plan. The
ownership status of each director and executive is reviewed
annually by the Committee. The multiples are as follows:
|
Value as a Multiple of |
||||
|
Position
|
Base Salary or Fees | |||
|
Director
|
X 3 | |||
|
Chairman, CEO, President
|
X 8 | |||
|
Senior Executive Vice President
|
X 6 | |||
|
Executive Vice President
|
X 4 | |||
|
Corporate Vice President
|
X 3 | |||
|
Subsidiary Vice President
|
X 2 | |||
COMPENSATION
COMMITTEE REPORT
The Compensation and Governance Committee has reviewed and
discussed the Compensation Discussion and Analysis with
management. Based on its review and discussions with management,
the Committee recommended to our Board that the Compensation
Discussion and Analysis be included in the Company’s Annual
Report on
Form 10-K
for fiscal year 2010 and this Proxy Statement. This report is
provided by the following independent directors who comprise the
Committee: Christine M. Vujovich (Chairperson), Jack R.
Wentworth, and Geoffrey L. Stringer.
19
Table of Contents
EXECUTIVE
OFFICER AND DIRECTOR COMPENSATION
SUMMARY
COMPENSATION TABLE
The Summary Compensation Table appearing below sets forth
information regarding the compensation paid
and/or
awarded to NEOs for the years ended June 30, 2010, 2009,
and 2008, excluding those fiscal years where individuals were
not classified as NEOs. The Summary Compensation Table also sets
forth information with respect to a former executive officer, P.
Daniel Miller, who would have been a NEO if he had been serving
as an executive officer as of June 30, 2010. For a more
thorough discussion of our executive compensation practices,
refer to the “Compensation Discussion and Analysis”
section of this Proxy Statement.
|
Non-Equity |
||||||||||||||||||||||||||||
|
Incentive Plan |
All Other |
|||||||||||||||||||||||||||
|
Name and Principal |
Bonus |
Stock Awards |
Compensation |
Compensation |
Total |
|||||||||||||||||||||||
|
Position
|
Year | Salary ($) | ($) (1) | ($) (2) | ($) (3) | ($) (4) | ($) | |||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (g) | (i) | (j) | |||||||||||||||||||||
|
James C. Thyen
|
2010 | $ | 810,836 | — | $ | 984,173 | $ | 64,867 | $ | 41,791 | $ | 1,901,667 | ||||||||||||||||
|
President, Chief
|
2009 | $ | 858,738 | — | $ | 996,237 | $ | 68,699 | $ | 61,253 | $ | 1,984,927 | ||||||||||||||||
|
Executive Officer
|
2008 | $ | 842,850 | — | $ | 964,107 | $ | 160,142 | $ | 129,417 | $ | 2,096,516 | ||||||||||||||||
|
Robert F. Schneider
|
2010 | $ | 414,484 | $ | 33,000 | $ | 153,379 | $ | 33,159 | $ | 25,506 | $ | 659,528 | |||||||||||||||
|
Executive Vice
|
2009 | $ | 418,646 | — | $ | 128,251 | $ | 33,492 | $ | 29,294 | $ | 609,683 | ||||||||||||||||
|
President, Chief
Financial Officer |
2008 | $ | 406,800 | — | $ | 117,319 | $ | 77,292 | $ | 60,769 | $ | 662,180 | ||||||||||||||||
|
Donald D. Charron
|
2010 | $ | 511,998 | $ | 10,000 | $ | 204,547 | $ | 138,239 | $ | 20,100 | $ | 884,884 | |||||||||||||||
|
Executive Vice
|
2009 | $ | 518,478 | — | $ | 213,613 | $ | 10,370 | $ | 26,049 | $ | 768,510 | ||||||||||||||||
|
President, President-
Kimball Electronics Group |
2008 | $ | 492,000 | $ | 60,000 | $ | 131,923 | $ | 54,120 | $ | 45,919 | $ | 783,962 | |||||||||||||||
|
John H. Kahle
|
2010 | $ | 348,180 | $ | 27,000 | $ | 153,379 | $ | 27,854 | $ | 23,492 | $ | 579,905 | |||||||||||||||
|
Executive Vice President,
|
||||||||||||||||||||||||||||
|
General Counsel, Secretary
|
||||||||||||||||||||||||||||
|
Gary W. Schwartz
|
2010 | $ | 279,410 | $ | 22,000 | $ | 153,379 | $ | 22,353 | $ | 27,303 | $ | 504,445 | |||||||||||||||
|
Executive Vice President,
|
||||||||||||||||||||||||||||
|
Chief Information Officer
|
||||||||||||||||||||||||||||
|
P. Daniel Miller(5)
|
2010 | $ | 364,838 | — | $ | — | (6) | $ | — | $ | 1,493,853 | (6) | $ | 1,858,691 | ||||||||||||||
|
Former Executive Vice President,
|
2009 | $ | 490,326 | — | $ | 128,251 | $ | 78,452 | $ | 95,679 | $ | 792,708 | ||||||||||||||||
|
President-Furniture
|
2008 | $ | 476,000 | — | $ | 117,319 | $ | 180,880 | $ | 126,825 | $ | 901,024 | ||||||||||||||||
| (1) | Amounts consist of discretionary cash compensation granted for services rendered in fiscal years 2010 and 2008. The 2008 amount was paid in fiscal year 2009 and the 2010 amounts will be paid in fiscal year 2011. | |
| (2) | Stock awards consist of performance shares. Amounts shown do not reflect compensation actually received by the NEOs. See the table “Option Exercise and Stock Vested In Fiscal Year 2010” for number and value of shares actually received during fiscal year 2010. The amounts shown represent the value at the grant date based upon the probable outcome of the performance conditions, which is estimated based on a payout at the target (Tier 4) level, or 40% of the maximum award opportunity for the APS and 100% of the maximum award opportunity for the LTPS. The grant date value of the maximum number of shares that could have been earned if actively employed at the end of fiscal year 2010 was $1,519,565 for Mr. Thyen; $181,459 for each of Messrs. Schneider, Kahle, and Schwartz; $232,627 for Mr. Charron; and $168,979 for Mr. Miller. The grant date value of the maximum number of shares that could have been earned in fiscal year 2009 was $1,492,482 for Mr. Thyen; $153,235 for each of Messrs. Schneider and Miller; and $238,597 for Mr. Charron. The grant date value of the maximum number of shares that could have been earned in fiscal year 2008 was $1,544,251 for Mr. Thyen; $146,527 for each of Messrs. Schneider and Miller; and $161,131 for Mr. Charron. The assumptions used to calculate the grant date values are set forth in Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and prior years. | |
| (3) | Amounts consist of cash incentive compensation earned for services rendered in the applicable fiscal year. The amounts are paid in the following fiscal year pursuant to the Incentive Bonus Plan. For a description of the Incentive Bonus Plan and the payout percentages awarded to the NEOs under the Incentive Bonus Plan for fiscal year 2010, see “Compensation Discussion and Analysis — Components of Compensation — Annual Cash Compensation — Cash Incentive Compensation” and “— NEOs’ Compensation”. |
20
Table of Contents
| (4) | Includes benefits received by the NEOs from executive severance, financial services programs, supplemental medical reimbursement, personal use of Company aircraft limited to transportation for spouses and NEOs related to a Board approved Executive Preventive Healthcare Program, the value of the services and related benefits provided pursuant to the Executive Preventive Healthcare Program, Company contributions earned for the Retirement Plan and SERP, and de minimus Christmas bonus and life insurance premiums paid by the Company. The Company values the personal use of Company aircraft for disclosure in this column at the aggregate incremental value of the benefit, which includes variable costs related to fuel, landing fees, crew expenses and other miscellaneous costs. SERP and Retirement Plan Company contribution amounts earned for fiscal year 2010 for Messrs. Thyen, Schneider, Charron, Kahle, Schwartz, and Miller were $25,794; $13,141; $15,321; $11,019; $8,842; and $12,426, respectively. Also included in this column for fiscal year 2010 were dividends credited on unvested RSUs at a value of $4,266 for Mr. Thyen and $1,206 for each of Messrs. Schneider, Charron, Kahle, Schwartz, and Miller. Dividend amounts were determined based on the number of RSUs multiplied by the Class A Common Stock dividend rate per share for dividend declarations prior to the RSU vesting date during the fiscal year. Dividends on RSUs were paid in share equivalents based on the average closing price of the Company’s Class B Common Stock as reported by Nasdaq for the ten trading-day period preceding the RSU vesting date. | |
| (5) | Mr. Miller, Former Executive Vice President, President-Furniture, was terminated without cause effective March 5, 2010. | |
| (6) | Mr. Miller was granted APS and LTPS awards on August 18, 2009, as reflected in the Grants of Plan-Based Awards in Fiscal Year 2010 table in this Proxy Statement. Upon his termination effective on March 5, 2010, 78,600 shares of Class A Common Stock were issued to Mr. Miller, which consisted of his unearned and unvested APS and LTPS awards granted in fiscal year 2010 and prior years, the vesting of which accelerated upon his termination. The fair market value of these shares as of March 5, 2010, calculated using $7.38, which represents the closing price of the Company’s Class B Common Stock as reported by Nasdaq on March 5, 2010, was $580,068. The fair market value of these shares received as severance is included in the “All Other Compensation” column of this table. As a result, the grant date value of the APS and LTPS awards granted on August 18, 2009, is not included in the “Stock Awards” column of this table. In addition to the stock compensation, Mr. Miller was paid cash severance of $913,785, which is included in the “All Other Compensation” column. |
See the Compensation Discussion and Analysis in this Proxy
Statement for further information about the material terms of
the NEOs’ compensation plans.
21
Table of Contents
GRANTS OF
PLAN-BASED AWARDS IN FISCAL YEAR 2010
|
All Other |
||||||||||||||||||||||||||||||||||||
|
Stock |
||||||||||||||||||||||||||||||||||||
|
Estimated Possible Payouts Under |
Estimated Future Payouts Under |
Awards: |
Grant Date Fair |
|||||||||||||||||||||||||||||||||
| Non-Equity Incentive Plan Awards (1) | Equity Incentive Plan Awards (2) |
Number of |
Value of Stock and |
|||||||||||||||||||||||||||||||||
|
Grant |
Threshold |
Target |
Maximum |
Threshold |
Target |
Maximum |
Shares |
Option Awards |
||||||||||||||||||||||||||||
|
Name
|
Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) | |||||||||||||||||||||||||||
| (a) | (b) | (c ) | (d) | (e) | (f) | (g) | (h) | (i) | (l) | |||||||||||||||||||||||||||
|
James C. Thyen
|
||||||||||||||||||||||||||||||||||||
|
Incentive Bonus Plan
|
$ | 0 | $ | 324,334 | $ | 810,836 | ||||||||||||||||||||||||||||||
|
APS(4)
|
8/18/09 | 0 | 57,200 | 143,000 | $ | 356,928 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
8/18/09 | 0 | 100,520 | 100,520 | $ | 627,245 | (3) | |||||||||||||||||||||||||||||
|
Robert F. Schneider
|
||||||||||||||||||||||||||||||||||||
|
Incentive Bonus Plan
|
$ | 0 | $ | 165,794 | $ | 414,484 | ||||||||||||||||||||||||||||||
|
APS(4)
|
8/18/09 | 0 | 3,000 | 7,500 | $ | 18,720 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
8/18/09 | 0 | 21,580 | 21,580 | $ | 134,659 | (3) | |||||||||||||||||||||||||||||
|
Donald D. Charron
|
||||||||||||||||||||||||||||||||||||
|
Incentive Bonus Plan
|
$ | 0 | $ | 204,799 | $ | 511,998 | ||||||||||||||||||||||||||||||
|
APS(4)
|
8/18/09 | 0 | 3,000 | 7,500 | $ | 18,720 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
8/18/09 | 0 | 29,780 | 29,780 | $ | 185,827 | (3) | |||||||||||||||||||||||||||||
|
John H. Kahle
|
||||||||||||||||||||||||||||||||||||
|
Incentive Bonus Plan
|
$ | 0 | $ | 139,272 | $ | 348,180 | ||||||||||||||||||||||||||||||
|
APS(4)
|
8/18/09 | 0 | 3,000 | 7,500 | $ | 18,720 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
8/18/09 | 0 | 21,580 | 21,580 | $ | 134,659 | (3) | |||||||||||||||||||||||||||||
|
Gary W. Schwartz
|
||||||||||||||||||||||||||||||||||||
|
Incentive Bonus Plan
|
$ | 0 | $ | 111,764 | $ | 279,410 | ||||||||||||||||||||||||||||||
|
APS(4)
|
8/18/09 | 0 | 3,000 | 7,500 | $ | 18,720 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
8/18/09 | 0 | 21,580 | 21,580 | $ | 134,659 | (3) | |||||||||||||||||||||||||||||
|
P. Daniel Miller
|
||||||||||||||||||||||||||||||||||||
|
Incentive Bonus Plan
|
$ | 0 | $ | 145,935 | $ | 364,838 | ||||||||||||||||||||||||||||||
|
APS(4)
|
8/18/09 | 0 | 3,000 | 7,500 | $ | 18,720 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
8/18/09 | 0 | 19,580 | 19,580 | $ | 122,179 | (3) | |||||||||||||||||||||||||||||
|
LTPS(5)
|
3/5/10 | 51,520 | $ | 380,218 | (6) | |||||||||||||||||||||||||||||||
| (1) | Represents potential cash incentive payments under the Incentive Bonus Plan with respect to fiscal year 2010 performance. The awards do not contain minimum thresholds. The target amount is determined based on a payout at the Tier 4 level (40%) of base salary. See the column captioned “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for the actual payout amounts under the Incentive Bonus Plan for fiscal year 2010 performance. See “Compensation Discussion and Analysis — Components of Compensation — Annual Cash Compensation — Cash Incentive Compensation” for additional information regarding the terms of the Incentive Bonus Plan. | |
| (2) | Represents APS and LTPS awards issued pursuant to the 2003 Plan. The awards do not contain minimum thresholds. The target amount is determined based on a payout at the Tier 4 level which is 40% of the maximum award opportunity for the APS and 100% of the maximum award opportunity for the LTPS. See “Compensation Discussion and Analysis — Components of Compensation — Stock Compensation — Performance Shares” for additional information regarding the terms of performance share awards. | |
| (3) | Amounts represent the grant date fair market value of the target number of performance shares granted calculated using $6.24, which represents the closing price of the Company’s Class B Common Stock as reported |
22
Table of Contents
| by Nasdaq on August 18, 2009 reduced by the present value of dividends not payable on outstanding performance shares. | ||
| (4) | APS awards were granted in August 2009 for the fiscal year 2010 performance period. Based on fiscal year 2010 performance, the actual number of shares earned by each of Messrs. Thyen, Schneider, Charron, Kahle, and Schwartz pursuant to their fiscal year 2010 APS award was 11,440; 600; 2,025; 600; and 600, respectively. Mr. Miller received 7,500 shares in accordance with his employment agreement, upon his termination without cause effective March 5, 2010. | |
| (5) | LTPS awards represent the tranches of performance shares awarded during fiscal years 2006 through 2010, which were earned for the fiscal year 2010 performance period. Based on fiscal year 2010 performance, the actual number of shares earned by Messrs. Thyen, Schneider, Charron, Kahle, and Schwartz was 20,104; 4,316; 5,956; 4,316; and 4,316, respectively. Mr. Miller received 71,100 shares in accordance with his employment agreement, upon his termination without cause effective March 5, 2010, which includes 19,580 shares applicable to the fiscal year 2010 performance period and 51,520 shares applicable to future performance periods. | |
| (6) | Amount represents the fair market value of the shares applicable to future performance shares issued to Mr. Miller upon his termination without cause effective March 5, 2010, calculated using $7.38, which represents the closing price of the Company’s Class B Common Stock as reported by Nasdaq on March 5, 2010. As stated in footnotes 4 and 5 above, Mr. Miller also received 27,080 shares applicable to the fiscal year 2010 performance period upon his termination, which had a fair market value of $199,850 on March 5, 2010. |
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END 2010
| Option Awards | Stock Awards | |||||||||||||||||||
|
Equity |
||||||||||||||||||||
|
Incentive |
||||||||||||||||||||
|
Equity |
Plan |
|||||||||||||||||||
|
Incentive |
Awards: |
|||||||||||||||||||
|
Plan |
Market or |
|||||||||||||||||||
|
Awards: |
Payout Value |
|||||||||||||||||||
|
Number of |
of Unearned |
|||||||||||||||||||
|
Unearned |
Shares, |
|||||||||||||||||||
|
Number of |
Shares, |
Units or |
||||||||||||||||||
|
Securities |
Units or |
Other |
||||||||||||||||||
|
Underlying |
Other |
Rights |
||||||||||||||||||
|
Unexercised |
Option |
Rights |
That Have |
|||||||||||||||||
|
Options- |
Exercise |
Option |
That Have |
Not |
||||||||||||||||
|
Exercisable |
Price |
Expiration |
Not Vested(3) |
Vested(4) |
||||||||||||||||
|
Name
|
(#) | ($) | Date | (#) | ($) | |||||||||||||||
| (a) | (b) | (e) | (f) | (i) | (j) | |||||||||||||||
|
James C. Thyen
|
97,500 | (1) | $ | 15.06 | 11/14/12 | |||||||||||||||
| 45,000 | (2) | $ | 15.24 | 8/21/11 | ||||||||||||||||
| 399,000 | $ | 2,206,470 | ||||||||||||||||||
|
Robert F. Schneider
|
30,000 | (1) | $ | 15.06 | 11/14/12 | |||||||||||||||
| 84,100 | $ | 465,073 | ||||||||||||||||||
|
Donald D. Charron
|
30,000 | (1) | $ | 15.06 | 11/14/12 | |||||||||||||||
| 115,700 | $ | 639,821 | ||||||||||||||||||
|
John H. Kahle
|
30,000 | (1) | $ | 15.06 | 11/14/12 | |||||||||||||||
| 84,100 | $ | 465,073 | ||||||||||||||||||
|
Gary W. Schwartz
|
30,000 | (1) | $ | 15.06 | 11/14/12 | |||||||||||||||
| 84,100 | $ | 465,073 | ||||||||||||||||||
|
P. Daniel Miller
|
— | (5) | — | (5) | $ | — | (5) | |||||||||||||
| (1) | These stock options were granted to the NEOs on November 15, 2002 and vested on November 15, 2007. | |
| (2) | These stock options were granted to the NEO on August 22, 2001 and vested on August 22, 2003. |
23
Table of Contents
| (3) | Unearned and unvested equity incentive plan awards consists of the following: |
|
Initial |
||||||||||||||
|
Name
|
Award | Shares (#) | Grant Date |
Vesting Date(s)
|
||||||||||
|
James C. Thyen
|
APS | 57,200 | 8/18/09 | 8/16/10 | ||||||||||
| LTPS | 183,000 | 8/18/09 | Five remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 65,920 | 8/19/08 | Four remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 43,440 | 8/21/07 | Three remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 32,960 | 8/22/06 | Two remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 16,480 | 9/7/05 | 8/16/10 | |||||||||||
|
Robert F. Schneider
|
APS | 3,000 | 8/18/09 | 8/16/10 | ||||||||||
| LTPS | 54,300 | 8/18/09 | Five remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 10,720 | 8/19/08 | Four remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 8,040 | 8/21/07 | Three remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 5,360 | 8/22/06 | Two remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 2,680 | 9/7/05 | 8/16/10 | |||||||||||
|
Donald D. Charron
|
APS | 3,000 | 8/18/09 | 8/16/10 | ||||||||||
| LTPS | 54,300 | 8/18/09 | Five remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 38,720 | 8/19/08 | Four remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 11,640 | 8/21/07 | Three remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 5,360 | 8/22/06 | Two remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 2,680 | 9/7/05 | 8/16/10 | |||||||||||
|
John H. Kahle
|
APS | 3,000 | 8/18/09 | 8/16/10 | ||||||||||
| LTPS | 54,300 | 8/18/09 | Five remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 10,720 | 8/19/08 | Four remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 8,040 | 8/21/07 | Three remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 5,360 | 8/22/06 | Two remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 2,680 | 9/7/05 | 8/16/10 | |||||||||||
|
Gary W. Schwartz
|
APS | 3,000 | 8/18/09 | 8/16/10 | ||||||||||
| LTPS | 54,300 | 8/18/09 | Five remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 10,720 | 8/19/08 | Four remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 8,040 | 8/21/07 | Three remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 5,360 | 8/22/06 | Two remaining annual vesting dates beginning 8/16/10 | |||||||||||
| LTPS | 2,680 | 9/7/05 | 8/16/10 | |||||||||||
24
Table of Contents
| APS and LTPS awards represent the number of shares available for issuance pursuant to performance share awards assuming the targeted performance. At the targeted performance level, 40% of the shares eligible to be received under the APS award would be issued and 100% of the shares eligible to be received under the LTPS award would be issued. For LTPS awards, the initial grant date shown is the grant date of the initial annual tranche of the five year awards. The remaining tranches for each LTPS award listed above will have grant dates occurring annually at the beginning of each performance period at approximately the same date each year. |
| (4) | Calculated using the $5.53 closing price of Class B Common Stock as reported by Nasdaq on June 30, 2010. | |
| (5) | Mr. Miller’s outstanding unearned APS and LTPS awards were all issued on March 5, 2010, in accordance with his employment agreement, upon his termination without cause. Mr. Miller’s outstanding stock options had no intrinsic value on March 5, 2010, and were cancelled upon his termination. |
OPTION
EXERCISES AND STOCK VESTED IN FISCAL YEAR 2010
| Option Awards | Stock Awards | |||||||||||||||
|
Number of Shares |
Value Realized on |
Number of Shares |
Value Realized on |
|||||||||||||
|
Acquired on Exercise |
Exercise |
Acquired on Vesting |
Vesting |
|||||||||||||
|
Name
|
(#) | ($) | (#)(1) | ($)(2) | ||||||||||||
| (a) | (b) | (c) | (d) | (e) | ||||||||||||
|
James C. Thyen
|
0 | $ | 0 | 81,994 | $ | 647,081 | ||||||||||
|
Robert F. Schneider
|
0 | $ | 0 | 20,233 | $ | 164,012 | ||||||||||
|
Donald D. Charron
|
0 | $ | 0 | 21,633 | $ | 173,000 | ||||||||||
|
John H. Kahle
|
0 | $ | 0 | 20,233 | $ | 164,012 | ||||||||||
|
Gary W. Schwartz
|
0 | $ | 0 | 20,233 | $ | 164,012 | ||||||||||
|
P. Daniel Miller
|
0 | $ | 0 | 99,153 | $ | 746,135 | ||||||||||
| (1) | Shares acquired upon vesting during fiscal year 2010 include APS awards and tranches of current and prior year LTPS awards granted on August 19, 2008, and RSUs and accumulated dividends on RSUs granted January 21, 2005. Mr. Miller’s shares include outstanding shares received in accordance with his employment agreement, upon his termination without cause. Shares have not been reduced by the following shares withheld to satisfy tax withholding obligations: Mr. Thyen — 25,494 shares; Mr. Schneider — 6,785 shares; Mr. Charron — 7,212 shares; Mr. Kahle — 6,809 shares; Mr. Schwartz — 6,834 shares; and Mr. Miller — 30,871 shares. | |
| (2) | The value realized is calculated by multiplying the closing price of Class B Common Stock as reported by Nasdaq on the vesting date by the number of shares that vested. Performance shares vested on August 18, 2009, at a $6.42 closing price. Restricted share units vested on January 21, 2010, at an $8.34 closing price. Mr. Miller’s shares received in accordance with his employment agreement, upon his termination without cause, were paid on March 5, 2010, and were valued at $580,068 using the termination date closing price of $7.38. |
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
The following table summarizes the Company’s equity
compensation plans as of June 30, 2010:
|
Number of Securities |
||||||||||||||||
|
Remaining Available for |
||||||||||||||||
|
Number of Securities to |
Weighted Average |
Future Issuance Under |
||||||||||||||
|
be Issued Upon Exercise |
Exercise Price of |
Equity Compensation Plans |
||||||||||||||
|
of Outstanding Options, |
Outstanding Options, |
(excluding securities |
||||||||||||||
| Warrants and Rights | Warrants and Rights | reflected in first column) | ||||||||||||||
|
Equity compensation plans approved by Share Owners
|
2,087,713 | (1) | $ | 15.13 | (2) | 31,701 | (3) | |||||||||
|
Equity compensation plans not approved by Share Owners
|
-0- | -0- | -0- | |||||||||||||
|
Total
|
2,087,713 | $ | 15.13 | 31,701 | ||||||||||||
25
Table of Contents
| (1) | Includes 648,460 Class B stock option grants and 1,421,003 Class A and 18,250 Class B performance share awards. The number of performance shares assumes the maximum number of shares which the participant is eligible to receive if applicable profitability levels are achieved. Approximately 33% of the total maximum number of shares originally granted was earned for fiscal year 2010. | |
| (2) | Performance shares not included as there is no exercise price for these awards. | |
| (3) | Includes 31,701 Class A and Class B shares available for issuance as restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units, and stock appreciation rights under the 2003 Plan. The number of performance shares subtracted from the shares available for issuance under the 2003 Plan is the maximum number of shares which the participant is eligible to receive if applicable profitability levels are achieved. Approximately 33% of the total maximum number of shares originally granted was earned for fiscal year 2010. Unearned shares are available for re-issuance under the 2003 Plan. No shares remain available for issuance under the Company’s prior stock option plans. |
NONQUALIFIED
DEFERRED COMPENSATION IN FISCAL YEAR 2010
|
Executive |
Registrant |
Aggregate |
||||||||||||||||||
|
Contributions in |
Contributions in |
Aggregate Earnings |
Withdrawals/ |
Aggregate Balance |
||||||||||||||||
|
Last FY |
Last FY |
in Last FY |
Distributions |
at Last FYE |
||||||||||||||||
|
Name
|
($)(1) | ($)(2) | ($)(3) | ($) | ($)(4) | |||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||||
|
James C. Thyen
|
$ | 219,934 | $ | — | $ | 341,664 | $ | — | $ | 2,899,075 | ||||||||||
|
Robert F. Schneider
|
$ | 22,409 | $ | — | $ | 57,713 | $ | — | $ | 488,780 | ||||||||||
|
Donald D. Charron
|
$ | 130,636 | $ | — | $ | 117,252 | $ | — | $ | 1,344,697 | ||||||||||
|
John H. Kahle
|
$ | — | $ | — | $ | 62,487 | $ | — | $ | 528,882 | ||||||||||
|
Gary W. Schwartz
|
$ | 18,094 | $ | — | $ | 25,572 | $ | — | $ | 181,762 | ||||||||||
|
P. Daniel Miller(5)
|
$ | — | $ | — | $ | 67,393 | $ | — | $ | 614,868 | ||||||||||
| (1) | These amounts are included in the fiscal year 2010 amounts in the “Salary” column of the Summary Compensation Table. | |
| (2) | There was no Company contribution paid in September 2009 (based on fiscal year 2009 earnings). | |
| (3) | Earnings do not represent above-market or preferential rates, and are not included in the Summary Compensation Table for fiscal year 2010 or prior years. | |
| (4) | The Aggregate Balance is the balance in the NEO’s SERP account as of June 30, 2010. The balance includes executive contributions in fiscal year 2010 and prior fiscal years, which are included in the “Salary” column of the Summary Compensation Table. The balance also includes Company contributions in fiscal year 2010 and prior fiscal years, which are included in the “All Other Compensation” column of the Summary Compensation Table. | |
| (5) | In accordance with his employment agreement, upon his termination without cause, Mr. Miller is entitled to receive a distribution of his SERP balance, which consists primarily of employee contributions. The distribution from the SERP will occur in the first half of fiscal year 2011. |
Activity disclosed in the table above relates solely to the
Company’s SERP which is its only nonqualified deferred
compensation arrangement. See the “Components of
Compensation — Nonqualified Deferred
Compensation” section of the Compensation Discussion and
Analysis for further information about the material terms of the
SERP.
26
Table of Contents
Employment
Agreements with NEOs and Potential Payments Upon Termination Or
Change-In-Control
On May 1, 2006, your Company entered into an Employment
Agreement with each of the NEOs. Each of the Employment
Agreements is in substantially the same form. Pursuant to the
Employment Agreements, if the executive’s employment is
terminated by the Company without cause or by the executive for
good reason, the Company will provide compensation and benefits
to the executive as follows:
(i) base salary through the date of termination of
employment;
(ii) any deferred and unpaid cash incentive amounts due for
the immediately preceding fiscal year and a prorated amount of
the target cash incentive for the cash incentive period in which
his last day of employment occurs;
(iii) (a) unless the executive’s termination
occurs during the one year period before a change in control of
the Company or during the two year period following a change in
control, severance pay equal to the sum of the executive’s
annual base salary at the highest rate in effect during the
three years immediately preceding the last day of employment and
the higher of either the executive’s target cash incentive
for the period in which the last day of employment occurs or the
executive’s average annual cash incentive award for the
three annual cash incentive periods immediately preceding the
last day of employment, plus a reimbursement payment of $50,000
(subject to
cost-of-living
adjustment) in lieu of continued welfare and fringe benefits, or
(b) if the executive’s termination occurs during the
one year period preceding a change in control or the two year
period following a change in control, severance pay equal to
three times, in the case of James C. Thyen, and two times, in
the case of the other executives, the amount determined in
(iii)(a) above;
(iv) reimbursement for outplacement service costs up to
$75,000, in the case of James C. Thyen, and $25,000, in the case
of the other executives;
(v) a payment in cash, shares or a combination thereof at
the Company’s discretion equal to the intrinsic value at
the termination date of all options and stock appreciation
rights, and the fair market value of restricted stock, deferred
share units, performance shares, and performance units, all of
which will become fully vested; and
(vi) payment of all SERP benefit amounts, which will become
fully vested.
“Cause” means a determination, by at least
three-quarters of the members of the Board, that one or more of
the following has occurred:
| • | the executive’s willful and continued failure to perform substantially the duties of his position or to follow lawful instructions of a senior executive or the Board that continues for five days after the executive receives written notice identifying such failure; | |
| • | the executive’s conviction of a felony or of another crime that reflects adversely on the Company; | |
| • | the executive’s engaging in fraudulent or dishonest conduct, gross misconduct that is injurious to the Company, or any misconduct that involves moral turpitude; or | |
| • | the executive’s material breach of his obligations under his employment agreement. |
“Good reason” means one or more of the following has
occurred:
| • | a material adverse change in the nature or scope of the executive’s responsibilities; | |
| • | a reduction in the executive’s salary rate or target cash incentive amount; | |
| • | a reduction of 5% or more in the aggregate benefits provided to the executive and his dependents under the Company’s employee benefit plans; | |
| • | a significant diminution in the executive’s position, authority, duties or responsibilities; | |
| • | a relocation of the executive’s principal site of employment to a location more than fifty (50) miles from the principal employment site; or |
27
Table of Contents
| • | failure by the Company to obtain an assumption agreement regarding the executive’s employment agreement from any successor of the Company. |
In the event of other terminations of employment, the executive
will receive his base salary through the date of termination and
will be entitled to any benefits under the regular terms of the
welfare, retirement, Incentive Bonus, SERP, and equity and
incentive plans.
“Change in control” generally means the consummation
of any of the following:
| • | the acquisition, by any one person or more than one person acting as a group, of ownership interests representing more than 50% of the total fair market value or of the total voting power of all ownership interests (the “Majority Ownership”) of the Company, any affiliate of the Company that employs the executive, any entity that has a Majority Ownership of either the Company or such affiliate, or any entity in an uninterrupted chain of Majority Ownership culminating in the ownership of the Company or such affiliate (each, a “Relevant Company”) through merger, consolidation, or stock transfer; | |
| • | the acquisition during any 12-month period, by any one person or more than one person acting as a group, of ownership interests in a Relevant Company possessing 35% or more of the total voting power of all ownership interests in the Relevant Company; | |
| • | the acquisition of ownership during any 12-month period, by any one person or more than one person acting as a group, of 40% or more of the total gross fair market value of the assets of a Relevant Company; or | |
| • | the replacement of a majority of members of the Board during any 12-month period, by members whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; |
provided, however, that any occurrence that does not constitute
a change in the ownership or effective control, or in the
ownership of a substantial portion of the assets of, a Relevant
Entity within the meaning of Section 409A(a)(2)(A)(v) of
the Internal Revenue Code and its interpretive regulations does
not constitute a “change in control”.
Upon a change in control of the Company, the Company will pay to
the executives an amount in cash, shares or a combination
thereof at the Company’s discretion equal to the value at
the effective date of the change of control of all options,
stock appreciation rights, restricted stock, deferred share
units, performance shares, performance units, and Incentive
Bonus Plan payments, all of which will become fully vested. In
addition, the executive will become fully vested in the SERP and
will receive all benefit amounts under that plan. Further, upon
a change in control, as an incentive for the executive to remain
available to assist with transition matters, the Company will
offer the executive a retention bonus equal to 50%, in the case
of James C. Thyen, and 40%, in the case of the other executives,
of the executive’s annual salary, payable in two equal
installments, the first after three months following the change
in control and the second after an additional three months, in
each case as long as the executive remains an employee during
such time (or if his employment is terminated by the Company
without cause or by the executive for good reason).
The Employment Agreements also provide that in the event the
executive incurs any gross income inclusion, interest or
additional tax pursuant to Section 409A of the Internal
Revenue Code on any payments from the Company, then the Company
will make a supplemental payment to the executive in an amount
sufficient to pay the resulting tax liability as well as the tax
liability on the supplemental payment. In addition, under the
Employment Agreements, if any of the Company’s payments to
the executive are subject to excise tax (or any interest or
penalties incurred due to excise tax) imposed by
Section 4999 of the Internal Revenue Code, the executive
will be entitled to reimbursement for the amount of the excise
tax (plus interest and penalties). The Committee may, however,
decide to reduce or eliminate that reimbursement or to reduce
the executive’s compensation to the extent necessary to
avoid Section 4999 taxation, if the aggregate compensation
payable because of a change in control would exceed five percent
of the net proceeds of the transaction.
In addition, the Employment Agreements impose non-competition
and non-solicitation obligations on the executives during the
term of their employment and for a period of 12 months (or
a shorter period, for an executive employed for fewer than
12 months) following termination of employment for any
reason.
28
Table of Contents
The table below reflects the amount of compensation payable to
each of the NEOs in the event of termination of such NEO’s
employment. The amounts shown assume that such termination was
effective as of June 30, 2010, and thus includes amounts
earned through such time and are estimates of the amounts that
would be paid to the NEOs upon their termination. The actual
amounts to be paid can only be determined at the time of such
NEO’s separation from the Company and could therefore be
more or less than the amounts set forth below. For the amounts
actually paid or payable to Mr. Miller upon his termination
without cause on March 5, 2010, see footnote 6 to the
Summary Compensation Table and footnote 5 to the Nonqualified
Deferred Compensation In Fiscal Year 2010 table.
|
Change In |
Without Cause or |
Death, Disability |
Other |
|||||||||||||
| Control | with Good Reason | or Retirement(5) | Termination(6) | |||||||||||||
|
James C. Thyen
|
||||||||||||||||
|
Lump Sum(1)
|
$ | 4,915,694 | $ | 1,355,994 | $ | 0 | $ | 0 | ||||||||
|
Accelerated Benefits(2)
|
$ | 2,745,811 | $ | 2,745,811 | $ | 239,305 | $ | 239,305 | (7) | |||||||
|
Retention Bonus(3)
|
$ | 405,418 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
SERP(4)
|
$ | 2,899,075 | $ | 2,899,075 | $ | 2,899,075 | $ | 2,899,075 | ||||||||
|
TOTAL
|
$ | 10,965,998 | $ | 7,000,880 | $ | 3,138,380 | $ | 3,138,380 | (7) | |||||||
|
Robert F. Schneider
|
||||||||||||||||
|
Lump Sum(1)
|
$ | 1,557,227 | $ | 680,205 | $ | 0 | $ | 0 | ||||||||
|
Accelerated Benefits(2)
|
$ | 523,117 | $ | 523,117 | $ | 60,344 | $ | 0 | ||||||||
|
Retention Bonus(3)
|
$ | 168,626 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
SERP(4)
|
$ | 488,780 | $ | 488,780 | $ | 488,780 | $ | 488,780 | ||||||||
|
TOTAL
|
$ | 2,737,750 | $ | 1,692,102 | $ | 549,124 | $ | 488,780 | ||||||||
|
Donald D. Charron
|
||||||||||||||||
|
Lump Sum(1)
|
$ | 1,923,537 | $ | 821,271 | $ | 0 | $ | 0 | ||||||||
|
Accelerated Benefits(2)
|
$ | 802,945 | $ | 802,945 | $ | 182,374 | $ | 0 | ||||||||
|
Retention Bonus(3)
|
$ | 208,291 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
SERP(4)
|
$ | 1,344,697 | $ | 1,344,697 | $ | 1,344,697 | $ | 1,344,697 | ||||||||
|
TOTAL
|
$ | 4,279,470 | $ | 2,968,913 | $ | 1,527,071 | $ | 1,344,697 | ||||||||
|
John H. Kahle
|
||||||||||||||||
|
Lump Sum(1)
|
$ | 1,345,235 | $ | 584,328 | $ | 0 | $ | 0 | ||||||||
|
Accelerated Benefits(2)
|
$ | 517,812 | $ | 517,812 | $ | 55,039 | $ | 0 | ||||||||
|
Retention Bonus(3)
|
$ | 141,648 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
SERP(4)
|
$ | 528,882 | $ | 528,882 | $ | 528,882 | $ | 528,882 | ||||||||
|
TOTAL
|
$ | 2,533,577 | $ | 1,631,022 | $ | 583,921 | $ | 528,882 | ||||||||
|
Gary W. Schwartz
|
||||||||||||||||
|
Lump Sum(1)
|
$ | 1,125,288 | $ | 484,852 | $ | 0 | $ | 0 | ||||||||
|
Accelerated Benefits(2)
|
$ | 512,311 | $ | 512,311 | $ | 49,538 | $ | 49,538 | (7) | |||||||
|
Retention Bonus(3)
|
$ | 113,672 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
SERP(4)
|
$ | 181,762 | $ | 181,762 | $ | 181,762 | $ | 181,762 | ||||||||
|
TOTAL
|
$ | 1,933,033 | $ | 1,178,925 | $ | 231,300 | $ | 231,300 | (7) | |||||||
| (1) | Payment based on executive’s annual base salary and cash incentive compensation as of June 30, 2010. The amounts include severance, benefits allowance, outplacement reimbursement, and, for a termination upon a change in control, the amount estimated to be payable to the NEO for reimbursement of the federal excise tax on excess parachute payments (Section 4999 of the Internal Revenue Code). This excise tax is payable if the value of certain payments that are contingent upon a change in control, referred to as parachute payments, exceeds a safe harbor amount. The computation of the excise tax is complex and is subject to various questions of interpretation. The amount of reimbursement included for excise tax reflects the Company’s best estimate at this time. In addition, there is estimated to be no tax liability pursuant to Section 409A of the Internal Revenue Code and accordingly no amounts are included for reimbursement of this tax. | |
| (2) | Represents the value of unvested APS and LTPS awards, the vesting of which would accelerate as a result of the specified triggering event. APS and LTPS awards are valued by multiplying $5.53, the closing price of the Company’s Class B Common Stock as reported by Nasdaq on June 30, 2010, by the number of unvested shares. The amount also includes the accrued but unpaid cash incentive compensation due under the Incentive Bonus Plan for fiscal year 2010. These amounts will be paid in a lump sum upon the specified event of termination. No stock options were “in-the-money” as of June 30, 2010. |
29
Table of Contents
| (3) | Amount payable in two installments: 50% — 3 months after a change in control; and 50% — 6 months after a change in control. | |
| (4) | Represents the fully vested SERP balance reflected in the Nonqualified Deferred Compensation Table included in this Proxy Statement, as each NEO has more than five years of service with the Company. This amount will be paid in a lump sum after a change in control, termination without cause or with good reason, or death. In the case of disability, retirement or voluntary termination, the amount will be paid pursuant to the election of the NEO. | |
| (5) | The amounts listed in the “Death, Disability or Retirement” column represent payouts for each of these events for Messrs. Thyen and Schwartz. For Messrs. Schneider, Charron, and Kahle, the amounts listed in this column represent only death or disability payouts because they were not of retirement age as of June 30, 2010, and therefore are not eligible for retirement benefits. | |
| (6) | Includes termination by the Company for cause and voluntary termination by the NEO. | |
| (7) | In the event of a termination of Mr. Thyen or Mr. Schwartz by the Company for cause, they would receive no accelerated benefits. If Mr. Thyen or Mr. Schwartz leaves the Company voluntarily, their departure would be considered a retirement and they would receive the indicated accelerated benefits. |
In addition, the amounts shown in the table above do not include
payments and benefits to the extent they are provided on a
non-discriminatory basis to salaried employees generally upon
termination of employment. These include accrued salary, health
benefits and distribution of account balances under the
Retirement Plan.
DIRECTOR
COMPENSATION
Fiscal
Year 2010 Compensation to Non-Employee Directors
Directors’ compensation is set by the Board. The level of
compensation is guided by the following goals: compensation
should fairly pay Directors for work required in a company of
Kimball’s size and scope; and the structure of the
compensation should be simple, transparent, market competitive,
and easy to understand.
All non-employee Directors of your Company receive an annual
retainer of $40,000 per year for service as Directors. The
Chairperson of the Audit Committee of the Board receives $5,000
per committee meeting, and other Audit Committee members receive
$3,500 per committee meeting. The Chairperson of the
Compensation and Governance Committee receives $3,500 per
committee meeting and other Compensation and Governance
Committee members receive $2,000 per committee meeting. Members
of the Strategic Planning Committee receive $3,500 per committee
meeting. Directors may elect to receive all of their annual
retainer and/or meeting fees in shares of Class B Common
Stock issued under the 2003 Plan. Directors also are reimbursed
for travel expenses incurred in connection with Board and
committee meetings.
30
Table of Contents
The following Non-Employee Director Compensation Table shows the
compensation that each non-employee Director was paid or earned
with respect to fiscal year 2010. A full-time officer, who is or
becomes a member of the Board, does not receive additional
compensation for serving as a member of the Board
and/or as a
member of any of the committees. Mr. Douglas A. Habig and
Mr. James C. Thyen are not included in this table because
they received no additional compensation for their service as
Directors. During fiscal year 2010, the Directors, other than
Messrs. Habig and Thyen, received compensation for serving
on the Board and committees as follows:
Non-Employee
Director Compensation in Fiscal Year 2010
|
Fees Earned or Paid |
||||
|
in Cash (1) |
||||
|
Name
|
($) | |||
| (a) | (b) | |||
|
Harry W. Bowman
|
$ | 55,000 | ||
|
Geoffrey L. Stringer
|
$ | 54,500 | ||
|
John T. Thyen(2)
|
$ | 0 | ||
|
Ronald J. Thyen(2)
|
$ | 0 | ||
|
Thomas J. Tischhauser
|
$ | 50,500 | ||
|
Christine M. Vujovich
|
$ | 45,500 | ||
|
Jack R. Wentworth
|
$ | 45,500 | ||
| (1) | Includes the following amount of fees for which the Director elected to receive Class B Common Stock in lieu of cash: Mr. Bowman — $15,000; Mr. Stringer — $54,500; Mr. Tischhauser — $50,500; Ms. Vujovich — $5,500; and Dr. Wentworth — $5,500. These amounts were converted into shares of Class B Common Stock using the per share price of $7.63, the “market value” for such shares on November 16, 2009. As defined in the 2003 Plan, market value means the average of the closing prices during the ten trading day period preceding the date that fees are converted to shares. | |
| (2) | Messrs. John Thyen and Ron Thyen served as Directors through October 21, 2008, at which time they were appointed as non-compensated Director Emeriti. |
Board
Stock Ownership Guidelines
As discussed under “Compensation Discussion and
Analysis — Share Ownership Guidelines,” the Board
adopted guidelines, which were updated in 2007, whereby all
members of your Board must own at a minimum, shares of your
Company’s stock equal in value to three times the total
annual fees earned as a Director.
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Table of Contents
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing
independent, objective oversight of the Company’s
accounting functions, internal control over financial reporting,
and financial reporting processes. During the fiscal year ended
June 30, 2010, the Audit Committee was comprised of at
least three directors as required per the Audit Committee
Charter. All members of the Audit Committee meet the
independence and experience requirements of The NASDAQ Stock
Market LLC and the Securities and Exchange Commission.
Management is responsible for the Company’s accounting
functions, internal control over financial reporting, and
financial reporting processes. The Company’s independent
registered public accounting firm, Deloitte & Touche,
LLP (“Deloitte”), is responsible for auditing and
expressing an opinion in accordance with auditing standards of
the Public Company Accounting Oversight Board (United States)
(“PCAOB”) on the Company’s consolidated financial
statements and the effectiveness of the Company’s internal
control over financial reporting.
In connection with these responsibilities, the Audit Committee
met with management and Deloitte to review and discuss the
June 30, 2010, financial statements including a discussion
of the acceptability and quality of the accounting principles,
the reasonableness of critical accounting policies, the clarity
of disclosures in the financial statements, and such other
matters as are required to be discussed with the Audit Committee
under standards established by the PCAOB. The Audit Committee
also discussed with Deloitte the matters required by Statement
on Auditing Standards No. 114 (The Auditor’s
Communication With Those Charged With Governance), the
alternative treatments of financial information within
accounting principles generally accepted in the United States of
America that have been discussed with management (including the
ramifications of the use of such alternative treatments
preferred by Deloitte), the schedule of unadjusted differences,
the management representation letter, certain matters regarding
internal control over financial reporting, Deloitte’s
opinion (including consent), and the engagement letter. The
Audit Committee also has received the written disclosures and
the letter from Deloitte required by applicable requirements of
the PCAOB regarding Deloitte’s communications with the
Audit Committee concerning independence, and has discussed with
Deloitte its independence from the Company and management. In
addition, the Audit Committee considered whether Deloitte’s
independence would be jeopardized by providing non-audit
services to the Company.
The Audit Committee reviewed the overall scope of the audits
performed by the internal auditor and Deloitte. The Audit
Committee meets with the internal auditor and Deloitte, with and
without management present, to discuss the results of their
examinations of the Company’s internal control over
financial reporting and the overall quality of the
Company’s financial reporting. The Audit Committee also
discussed with management and Deloitte, management’s report
on, and Deloitte’s report on and audit of, the
Company’s internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of
2002. The Audit Committee also meets at least two times annually
in a separate executive session with only members present.
It is not the duty of the Audit Committee to perform audits or
to determine that the Company’s financial statements are
complete and accurate and in accordance with generally accepted
accounting principles; that is the responsibility of management
and Deloitte. Members of the Audit Committee rely without
independent verification on the information provided to them and
on the representations made by management and Deloitte. Based
upon the Audit Committee’s discussions with management and
Deloitte, and the Audit Committee’s review of the
representations of management and Deloitte, the Audit Committee
recommended that the Board include the audited consolidated
financial statements in the Company’s Annual Report on
Form 10-K
for the year ended June 30, 2010, filed with the Securities
and Exchange Commission.
Respectfully submitted,
THE AUDIT COMMITTEE
Harry W. Bowman (Chairperson)
Geoffrey L. Stringer
Thomas J. Tischhauser
32
Table of Contents
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche, LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates (collectively
the “Deloitte Entities”) audited the Company’s
annual financial statements for the fiscal year ended
June 30, 2010. The Deloitte Entities have served as our
independent registered public accounting firm since 2002.
Representatives of the Deloitte Entities will be present at the
Annual Meeting and will have the opportunity to make a statement
and will be available to respond to appropriate questions.
Independent
Registered Public Accounting Firm Fees
|
2010 |
2009 |
|||||||
| Deloitte Entities | Deloitte Entities | |||||||
|
Audit Fees(a)
|
$ | 1,187,300 | $ | 1,275,300 | ||||
|
Audit-Related Fees(b)
|
$ | 82,462 | $ | 44,000 | ||||
|
Tax Fees(c)
|
$ | 74,824 | $ | 169,946 | ||||
|
All Other Fees
|
— | — | ||||||
|
Total
|
$ | 1,344,586 | $ | 1,489,246 | ||||
| (a) | Includes fees paid for the audit of the annual financial statements, for the audit of internal control over financial reporting, for the review of the quarterly financial statements and for the statutory audits of international subsidiaries. | |
| (b) | Consists primarily of fees paid for the audit of various benefit plans. | |
| (c) | Consists of fees paid for tax compliance and related tax services. |
Consideration
of Services Provided by the Independent Registered Public
Accounting Firm
The Audit Committee approves all audit and non-audit services
provided by the independent registered public accounting firm
prior to the services being performed. The Audit Committee has
established a pre-approval process for services provided by the
independent registered public accounting firm which complies
with the requirements of the Sarbanes-Oxley Act of 2002. A
description of the pre-approval process is attached to this
Proxy Statement as Appendix A. The Audit Committee has
considered whether all services provided are compatible with
maintaining the independent registered public accounting
firm’s independence in accordance with this pre-approval
process and has determined that such services are compatible.
Ratification
of Appointment of Independent Registered Public Accounting
Firm
The Audit Committee has appointed the Deloitte Entities to be
the Company’s independent registered public accounting firm
for the fiscal year ended June 30, 2011. They were
appointed based upon:
| • | performance on past audits, including the expertise of the engagement team; | |
| • | experience, client service, and responsiveness; | |
| • | leadership, management structure, and ethical culture; and | |
| • | the amount of fees charged in relation to scope of work performed. |
Ratification is not required by law or the Company’s
By-laws. The Company is submitting the appointment of the
Deloitte Entities to our Share Owners for ratification as a
matter of good corporate practice. If the appointment is not
ratified, the Audit Committee will consider whether it is
appropriate to appoint another independent registered public
accounting firm. Even if the appointment is ratified, the Audit
Committee, in its discretion, may appoint a different
independent registered public accounting firm at any time during
the year if it determines that such a change would be in the
best interests of the Company and our Share Owners.
The Board of Directors recommends a vote “FOR”
ratification of the appointment of the Deloitte Entities as the
Company’s independent registered public accounting firm.
33
Table of Contents
PROPOSAL TO
APPROVE THE KIMBALL INTERNATIONAL, INC.
2010 PROFIT SHARING INCENTIVE BONUS PLAN
2010 PROFIT SHARING INCENTIVE BONUS PLAN
Background. Your Board believes that
the long-term success of your Company depends, in part, on its
ability to recruit and retain outstanding individuals as
employees and to furnish these employees maximum incentive to
improve operations and increase profits. Your Board also
believes it is important to align compensation of officers and
salaried employees with the common interests of Share Owners.
In accordance with this belief, your Board, upon recommendation
of the Compensation and Governance Committee
(“Committee”) of the Board (comprised of independent
outside directors), has unanimously adopted and recommends for
Share Owner approval, the Kimball International, Inc. 2010
Profit Sharing Incentive Bonus Plan (the “Plan”). The
profit sharing framework of this Plan has been in place since
prior to the Company becoming publicly traded in 1976. The Plan
includes profit determinations at three levels within the
Company: (1) Worldwide for Company-wide performance
(“Worldwide”); (2) at a Group level for certain
combinations of Business Units (“Group”); and
(3) at a Business Unit level for the performance of
designated operations within the Company (“Business
Unit”).
All executive officers and other eligible employees participate
at the Worldwide, Group, or Business Unit level, or a
combination thereof.
Share Owner approval of the Plan is now sought to qualify the
awards under the Plan as “performance-based
compensation” under Section 162(m) of the Internal
Revenue Code. Section 162(m) disallows a deduction for
certain compensation paid in excess of $1 million to the
executive officers listed in the Summary Compensation Table in
this proxy statement, but only if employed as of the end of the
fiscal year (“Named Executive Officers”).
Performance-based compensation, however, is fully deductible by
the Company if the programs are approved by Share Owners and
meet certain other requirements. To maintain the deductibility
of payments under the Plan, the Board recommends that the Share
Owners approve the Plan at the Annual Meeting of Share Owners.
Goal. The goal of the Plan is to link
an employee’s compensation with the long-term financial
success of the Company. The intent is to encourage participants
to think, act and be rewarded like owners, and to seek out and
undertake initiatives that continuously improve the long-term
performance of the Company.
Eligibility. Executive officers and
full-time salaried employees of the Company, except those
covered under commission compensation programs, are eligible to
participate in the Plan (“Participants”).
Approximately 1,500 employees will be eligible to
participate in the Plan.
Bonus Criteria. The Plan measures
profitability in terms of “economic profit”, generally
equal to net income less the cost of capital. New capital
expenditures are not included in computing the cost of capital
for an appropriate period of time to encourage needed capital
investments. The Committee must approve the profitability tiers
(“Targets”) within the first 25% of the period of
service to which the Targets relate, but not later than
90 days after the commencement of that period
(“Relevant Time Period”). The Committee, within the
Relevant Time Period, may make adjustments for non-operating
income and loss and other profit-computation elements as it
deems appropriate to provide optimal incentives for eligible
employees. If other adjustments are necessary beyond the
Relevant Time Period, the Named Executive Officers will not be
eligible to receive any bonus resulting from such adjustments.
Bonus Amounts. The Plan establishes
potential bonus amounts as a range of percentages of the
Participant’s salary, with the bonus percentage increasing
with higher levels of profitability. The Plan also establishes
different bonus percentage ranges across several Participant
categories, setting higher bonus-percentage ranges for
Participants who, by virtue of their responsibilities, are
expected to have a greater effect on the Company’s
profitability.
At the highest responsibility levels, Participants may earn
bonuses of up to 100 percent of base salary. The Plan is
designed so that Participants will achieve maximum bonuses only
if the Company achieves economic profitability near the top
quartile of leading public companies
and/or its
competitors.
A Participant’s total bonus under the Plan may not exceed
$1 million for any fiscal year.
Awards under the Plan will be determined based on actual future
performance. Therefore, the amounts that will be paid pursuant
to the Plan in future years are not currently determinable.
However, as described above, the profit sharing framework of the
Plan has been in place for a number of years. The amounts
payable pursuant to the
34
Table of Contents
previous version of the Plan relating to performance in the
fiscal year ended June 30, 2010, for the following
individuals and groups were as follows:
AMOUNT OF
AWARD FOR FISCAL YEAR 2010
|
Name and Position
|
||||
|
James C. Thyen
|
$ | 64,867 | ||
|
President, Chief Executive Officer
|
||||
|
Robert F. Schneider
|
$ | 33,159 | ||
|
Executive Vice President, Chief Financial Officer
|
||||
|
Donald D. Charron
|
$ | 138,239 | ||
|
Executive Vice President, President-Kimball Electronics Group
|
||||
|
John H. Kahle
|
$ | 27,854 | ||
|
Executive Vice President, General Counsel, Secretary
|
||||
|
Gary W. Schwartz
|
$ | 22,353 | ||
|
Executive Vice President, Chief Information Officer
|
||||
|
All Current Executive Officers
|
$ | 464,079 | ||
|
Non-Executive Director Group
|
None | |||
|
Non-Executive Officer Employee Group
|
$ | 7,471,173 | ||
Administration. For a particular fiscal
year, the Committee must approve the Targets, profit-computation
adjustments, and any other conditions at the Worldwide and Group
profitability levels within the Relevant Time Period. Company
management will determine the comparable features for each
Business Unit profitability level.
At the end of each fiscal year, but before Plan bonuses may be
paid, the Committee must certify in writing that Targets and
other conditions have been satisfied. The Committee does not
have the discretion to increase the amount of any bonus for the
Named Executive Officers.
The Board may amend or terminate the Plan effective for future
fiscal years. The Board will not, however, amend the Plan
without Share Owner approval if such approval is required to
comply with Section 162(m) of the Internal Revenue Code or
other applicable law or to comply with applicable stock exchange
requirements.
Bonus Payments. If a Participant’s
bonus for the fiscal year does not exceed $2,000, the bonus will
be paid in a single sum during the following August. Bonuses
exceeding that amount will be paid during the following fiscal
year in five cash installments — 50% in the following
August and 12.5% in each of the following September, January,
April, and June.
If a Participant’s employment is terminated before a
scheduled payment date, the former employee will not be entitled
to receive that bonus payment or any subsequent bonus payment,
unless the Participant’s termination was caused by
retirement after attaining the country-specific retirement age
(62 in the U.S.), death, or permanent disability, in which case,
that Participant (or beneficiary, in the event of the
participant’s death) will be entitled to receive all bonus
payments for the previous fiscal year and a pro-rata share for
the current fiscal year, all to be paid in full within
21/2
months after the end of the Company’s fiscal year.
The Board of Directors recommends a vote “FOR”
approval of the Kimball International, Inc. 2010 Profit Sharing
Incentive Bonus Plan.
By Order of the Board of Directors
John H.
Kahle, Secretary
September 8, 2010
35
Table of Contents
APPENDIX A
APPROVAL
PROCESS FOR SERVICES PERFORMED BY
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Objective
To ensure the independent registered public accounting firm is
independent in both fact and appearance with respect to the
audit of the financial statements of Kimball International, Inc.
(Company).
Process
The independent registered public accounting firm of Kimball
International, Inc. reports to and is engaged by the Audit
Committee of the Company. Prior to the engagement of the
independent registered public accounting firm to render service,
the service and fees are approved by the Audit Committee. The
Audit Committee will not engage the independent registered
public accounting firm for any non-audit service that is
specifically prohibited by the SEC’s rules on auditor
independence nor will approval be granted for any non-audit
service that individually or in the aggregate, in the Audit
Committee’s opinion, impairs the independence of the
independent registered public accounting firm with respect to
the audit of the financial statements of the Company.
Pre-approval of services is obtained either (1) by explicit
pre-approval of individual services from the Audit Committee or
(2) by general pre-approval for certain tax compliance and
related tax services.
The Audit Committee has delegated authority to the Audit
Committee Chairperson to grant approval required by this policy
for any service engagements that arise between Audit Committee
meetings. During the next regularly scheduled Audit Committee
meeting, or sooner as appropriate, the Audit Committee
Chairperson updates the full committee of approved independent
registered public accounting firm services for informational
purposes.
The independent registered public accounting firm has reviewed
the policy and believes that the policy will not adversely
affect the firm’s independence.
36
Table of Contents
KIMBALL INTERNATIONAL, INC.
ATTN: JIM KRODEL
1600 ROYAL STREET
JASPER, IN 47549
ATTN: JIM KRODEL
1600 ROYAL STREET
JASPER, IN 47549
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when
you access the web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can
consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to
vote using the Internet and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the meeting date. Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
||
| KEEP THIS PORTION FOR YOUR RECORDS | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
DETACH AND RETURN THIS PORTION ONLY | |
The Board of Directors recommends a vote
|
For All |
Withhold All |
For All Except |
To withhold authority to vote for any
individual nominee(s), mark “For All
Except” and write the number(s) of the
nominee(s) on the line below. |
||||||||
FOR the following: 1. Election of Directors |
o | o | o | |||||||||
Nominees |
01
|
Harry W. Bowman | 02 | Douglas A. Habig | 03 | Geoffrey L. Stringer | 04 | James C. Thyen | 05 | Christine M. Vujovich | |||||||||||||||
06
|
Thomas J. Tischhauser |
The Board of Directors recommends a vote FOR proposals 2 and 3.
|
For | Against | Abstain | |||
2 Ratify the appointment of Deloitte & Touche, LLP as the independent registered
public accounting firm for fiscal year 2011.
|
o | o | o | |||
3 Approve the Kimball International, Inc. 2010 Profit Sharing Incentive Bonus Plan.
|
o | o | o | |||
NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the
meeting. |
If the stock is registered in the name of more than one person, the Proxy should be signed by all
named owners. If signing as attorney, executor, administrator, trustee, guardian, corporate
official, etc., please give full title as such. THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE
GIVEN.
Signature [PLEASE SIGN WITHIN BOX]
|
Date | Signature (Joint Owners) | Date | |||||||||||
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice
of Annual Meeting and Proxy Statement, Annual Report/10K is/are available at www.proxyvote.com.
KIMBALL INTERNATIONAL, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I appoint James C. Thyen and Douglas A. Habig, or either of them, each with full power of
substitution, as Proxies to vote all shares of CLASS A COMMON STOCK of Kimball International, Inc.
standing in my name on its books at the close of business on August 16, 2010, at the annual meeting
of its share owners to be held at the principal offices of the Company located at 1600 Royal
Street, Jasper, Indiana, at 9:30 A.M., Eastern Daylight Time, on Tuesday, October 19, 2010, and at
any adjournments thereof with respect to the matters on the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE SHARE OWNER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE
SIDE FOR THE BOARD OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
Continued and to be signed on reverse side
Table of Contents
KIMBALL INTERNATIONAL, INC.
ATTN: JIM KRODEL
1600 ROYAL STREET
JASPER, IN 47549
ATTN: JIM KRODEL
1600 ROYAL STREET
JASPER, IN 47549
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when
you access the web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can
consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to
vote using the Internet and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the meeting date. Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
||
| KEEP THIS PORTION FOR YOUR RECORDS | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
DETACH AND RETURN THIS PORTION ONLY | |
The Board of Directors recommends a vote
|
For All |
Withhold All |
For All Except |
To withhold authority to vote for any
individual nominee(s), mark “For All
Except” and write the number(s) of the
nominee(s) on the line below. |
||||||||
FOR the following: 1. Election of Directors |
o | o | o | |||||||||
Nominees |
07
|
Jack R. Wentworth |
NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting. |
If the stock is registered in the name of more than one person, the Proxy should be signed by all
named owners. If signing as attorney, executor, administrator, trustee, guardian, corporate
official, etc., please give full title as such. THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE
GIVEN.
Signature [PLEASE SIGN WITHIN BOX]
|
Date | Signature (Joint Owners) | Date | |||||||||||
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice
of Annual Meeting and Proxy Statement, Annual Report/10K is/are available at www.proxyvote.com.
KIMBALL INTERNATIONAL, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I appoint James C. Thyen and Douglas A. Habig, or either of them, each with full power of
substitution, as Proxies to vote all shares of CLASS B COMMON STOCK of Kimball International, Inc.
standing in my name on its books at the close of business on August 16, 2010, at the annual meeting
of its share owners to be held at the principal offices of the Company located at 1600 Royal
Street, Jasper, Indiana, at 9:30 A.M., Eastern Daylight Time, on Tuesday, October 19, 2010, and at
any adjournments thereof with respect to the matters on the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE SHARE OWNER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEE LISTED ON THE REVERSE
SIDE FOR THE BOARD OF DIRECTORS, EXCEPT FOR KIMBALL RETIREMENT PLAN PARTICIPANTS FOR WHOM, IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE TERMS OF THE PLAN.
Continued and to be signed on reverse side
TABLE OF CONTENTS
Proxy StatementprintVoting InformationprintShare Owner ProposalsprintShare Owner Communications with the Board of DirectorsprintShare Ownership InformationprintElection of DirectorsprintInformation Concerning the Board of Directors and CommitteesprintSection 16(a) Beneficial Ownership Reporting ComplianceprintReview and Approval of Transactions with Related PersonsprintCompensation Discussion and Analysis:printOverviewprintCompensation PhilosophyprintCompensation ProcessprintComponents of CompensationprintCompensation Related Risk AssessmentprintNEOs CompensationprintTax and Accounting ConsiderationsprintShare Ownership GuidelinesprintCompensation Committee ReportprintExecutive Officer and Director Compensation:printSummary Compensation TableprintGrants of Plan-Based Awards in Fiscal Year 2010printOutstanding Equity Awards at Fiscal Year End 2010printOption Exercises and Stock Vested in Fiscal Year 2010printSecurities Authorized for Issuance under Equity Compensation PlansprintNonqualified Deferred Compensation in Fiscal Year 2010printEmployment Agreements with NEOs and Potential Payments Upon Termination or Change- In-ControlprintDirector CompensationprintReport of the Audit CommitteeprintIndependent Registered Public Accounting FirmprintProposal to Approve the Kimball International, Inc. 2010 Profit Sharing Incentive Bonus PlanprintAppendix A Approval Process for Services Performed by the Independent Registered Public Accounting Firmprint