Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On January 4, 2023, Donald D. Charron, Chairman and Chief Executive Officer of
Kimball Electronics, Inc. ("Kimball Electronics," the "Company," "we," or "us")
informed Kimball Electronics of his intention to retire effective February 28,
2023. Mr. Charron has served as our Chairman and Chief Executive Officer since
we became a stand-alone public company in October 2014, and his decision to
retire as the Chairman and Chief Executive Officer is not the result of any
disagreement on any matter relating to our accounting practices, operations, or
policies. No new compensation or severance arrangements were entered into with
Mr. Charron in connection with his notice to the Company of his intention to
retire.
Kimball Electronics has appointed Richard D. Phillips, 52, to the role of Chief
Executive Officer and Director, effective March 1, 2023. With more than 20 years
of experience in operations and advisory roles, Mr. Phillips was most recently
the President and Chief Executive Officer from 2019 until 2022 for Elkay
Manufacturing Company, a global manufacturer and distributor of commercial and
residential plumbing products and designer and installer of commercial interiors
for the foodservice and hospitality sectors. He was also a member of the Board
of Directors for the Company. Prior to Elkay, Mr. Phillips served as the
President, Chief Executive Officer, and Board member from 2017 through 2019, for
Essendant, Inc. (formerly United Stationers, Inc.), a Fortune 500 wholesale
distributor of workplace-related products. Before joining Essendant, where he
held positions of increasing responsibility from 2013 through 2017, Mr. Phillips
held several leadership roles with McKinsey & Company, including co-leading the
Pharmaceuticals and Medical Products operations practice. He was elected Partner
in 2005. Mr. Phillips is an independent Director of the Greenheck Group, a
leader in the HVAC space, and previously served as an independent Director of
Follett Corporation. Mr. Phillips holds a Bachelor of Science in Finance from
Indiana University and a Master of Management from Northwestern University
Kellogg Graduate School of Management.
Mr. Phillips accepted a written offer letter on January 4, 2023. In connection
with Mr. Phillips' appointment as Chief Executive Officer and Director and
pursuant to the offer letter, the terms of his compensation include: (1) a base
salary of $850,000, (2) participation in our profit sharing incentive bonus
plan, at the category 0 participant level, with a target cash incentive of 100%
of base salary and a potential range of 0% - 200% of base salary, and (3) the
following share awards under our 2014 Stock Option and Incentive Plan:
a.92,072 Performance Shares, measured on the fiscal year 2023 to fiscal year
2025 performance cycle, with attainment determined as described in our proxy
statement for the 2022 Annual Meeting of Share Owners, vesting after fiscal year
2025 ("grant date")
b.23,017 Restricted Shares, vesting 1/3 one year after the grant date, 1/3 two
years after the grant date, and 1/3 three years after the grant date
c.42,626 Performance Shares, measured from Mr. Phillips's start date for a
period of three years, with attainment determined based on our total shareholder
return during the performance cycle as compared to a group of peer companies
determined by our Board of Directors, with a potential range of 0% - 100%
For fiscal year 2023 only, Mr. Phillips' profit sharing incentive bonus payout
will be the greater of (i) 100% of his base salary or (ii) the bonus for a
category 0 participant, in either case prorated based on his start date.
Mr. Phillips will participate in all other employee benefit plans generally
available to our executive officers of the Company, including severance terms
described in the Company's Executive Severance and Change in Control Plan. Mr.
Phillips' employment relationship is at will, meaning either Mr. Phillips or the
Company may terminate the relationship at any time for any reason, and with or
without notice.
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The description of Mr. Phillips' offer letter in this Item 5.02 is qualified in
its entirety by reference to the full text of the offer letter, a copy of which
is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Mr. Phillips is not related to any member of the Board or any executive officer
of the Company and is not a party to any transactions listed in Item 404(a) of
Regulation S-K. There are no arrangements or understandings between Mr. Phillips
and any other persons pursuant to which he was appointed Chief Executive
Officer.
Lead Independent Director, Robert J. Phillippy, a member of the Kimball
Electronics Board since 2018, was elected by the Board to serve as the Board's
non-executive Chairperson upon Mr. Charron's retirement. In accordance with the
Company's By-Laws, Mr. Phillips will fill the remainder of Mr. Charron's term as
Director through our annual meeting in 2024.
Our press release announcing Mr. Charron's retirement and the appointments of
Mr. Phillips and Mr. Phillippy is attached on Exhibit 99.1 and is incorporated
into this Item 5.02 by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The following exhibits are filed as part of this report:
Exhibit
Number Description
10.1 Offer Letter Dated January 4, 2023
99.1 Press Release dated January 10, 2023
104 Cover Page Interactive Data File (formatted in Inline XBRL)
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