<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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 / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 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/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
<PAGE> 2
KIMBALL INTERNATIONAL, INC.
1600 ROYAL STREET
JASPER, INDIANA 47549
(812) 482-1600
------------------
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
TO BE HELD OCTOBER 22, 1996
------------------
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 22, 1996, at
9:30 A.M., Eastern Standard Time, for the following purposes:
1. To elect ten directors of the Company.
2. To consider and vote upon the Kimball International, Inc. 1996 Stock
Incentive Program to replace the 1987 Stock Incentive Program which expires
August 10, 1997.
3. To consider and vote upon the Kimball International, Inc. 1996 Director
Stock Compensation and Option 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 21, 1996,
for determining the 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. Holders of shares of the
Company's Class A common stock are entitled to elect nine directors, to consider
and act upon approval of the Kimball International, Inc. 1996 Stock Incentive
Program, to consider and act upon approval of the Kimball International, Inc.
1996 Director Stock Compensation and Option Plan, and to vote upon all other
matters to be presented at the meeting. Holders of shares of the Company's Class
B common stock are entitled to elect one director but are not otherwise entitled
to vote.
A form of proxy, being solicited on behalf of the Board of Directors, is
enclosed along with a return envelope which requires no postage if mailed in the
United States.
Whether or not you plan to attend the meeting, we urge you to execute and
return promptly the enclosed form of proxy. If you own both shares of Class A
common stock and shares of Class B common stock, a separate form of proxy for
each class should be returned. The proxy is revocable and will not affect your
right to vote in person if you attend the meeting.
By Order of the Board of Directors
GARY P. CRITSER,
Secretary
September 11, 1996
PLEASE EXECUTE AND DATE THE ACCOMPANYING PROXY AND MAIL
IT PROMPTLY.
<PAGE> 3
KIMBALL INTERNATIONAL, INC.
1600 ROYAL STREET
JASPER, INDIANA 47549
(812) 482-1600
------------------
ANNUAL MEETING OF SHARE OWNERS
OCTOBER 22, 1996
------------------
PROXY STATEMENT
This Proxy Statement is being mailed to Share Owners of KIMBALL
INTERNATIONAL, INC. (the "Company") on or about September 11, 1996, and is
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 22, 1996, 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.
Any Share Owner who executes and returns a proxy may revoke the same at any
time prior to the voting thereof by either filing a written revocation with the
Secretary of the Company, submitting another duly executed proxy 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.
The entire cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by directors, officers and employees of the
Company without extra compensation. The Company will also reimburse brokerage
houses, custodians, nominees and fiduciaries for actual expenses incurred in
forwarding proxy material to beneficial owners.
The Annual Report to Share Owners for the year ended June 30, 1996,
accompanies this Proxy Statement.
VOTING INFORMATION
Only Share Owners of record at the close of business on August 21, 1996,
will be entitled to vote at the annual meeting. On that date, there were
outstanding 7,276,270 shares of Class A common stock and 13,535,475 shares of
Class B common stock. Class A Share Owners will elect nine directors rather than
ten as in 1995. Mr. Leonard B. Marshall, Jr., a director since 1975, died
unexpectedly June 17, 1996. At this time the Board is searching for a
replacement for Mr. Marshall, and it cannot be estimated when a replacement will
be appointed. Mr. Marshall was a director of your Company for approximately 21
years. He was also a member of the Board of Directors Audit, Compensation, and
Stock Option Committees of your Company. His presence on the Board will be
sorely missed. Mr. Marshall's replacement will be appointed as a director
representing Class A Share Owners. The Board appointed and recommends for
election Dr. Jack R. Wentworth as the director representing Class B Share
Owners. Dr. Wentworth has been a director of the Company representing Class A
Share Owners for approximately 12 years. Each share of Class A common stock is
entitled to one vote with respect to the election of the nine directors 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.
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 presence of a quorum requires that a majority
of outstanding shares be present at the meeting by proxy or in person. Neither
the non-voting of shares nor withholding authority to
<PAGE> 4
vote will affect the election of directors. Because of the vacant seat formerly
held by Mr. Marshall, proxies cannot be voted for a greater number of persons
than the number of nominees named. In regard to the voting to consider and
approve the Kimball International, Inc. 1996 Stock Incentive Program and the
Kimball International, Inc. 1996 Director Stock Compensation and Option Plan, an
affirmative vote of the majority of the shares of Class A Common Stock of the
Company represented and entitled to vote at the meeting shall be required for
approval. Accordingly, the non-voting of shares will not be deemed to be a vote
against the two plans. However, an abstention from voting by a Class A Share
Owner represented at the meeting has the same effect as a vote "against" the two
proposed plans.
All properly executed proxies received by the Board of Directors will be
voted. In the absence of contrary direction, the Board of Directors proposes to
vote the proxies FOR the election of each of the named nominees to the Board and
FOR approval of the Kimball International, Inc. 1996 Stock Incentive Program and
the Kimball International, Inc. 1996 Director Stock Compensation and Option
Plan.
Management knows of no other matter which may come up for action at the
meeting. However, if any other matter properly comes before the meeting, the
persons named in the proxy forms enclosed will vote in accordance with their
judgment on such matter.
Proposals which are desired to be presented at the 1997 annual meeting by
Share Owners of record in respect of such a meeting must be received by the
Company at its principal executive offices, 1600 Royal Street, Jasper, Indiana
47549, no later than May 14, 1997. Such proposals, however, must meet certain
requirements of regulations of the Securities and Exchange Commission for
inclusion in the Company's Proxy Statement.
SHARE OWNERSHIP INFORMATION
Under regulations of the Securities and Exchange Commission, persons who
have power to vote 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 dispositive power of certain shares listed in the following table is
shared, the same securities in such cases are listed opposite more than one name
in the table. The total number of shares of the Company listed in the table for
the executive officers and directors shown, after elimination of such
duplication, is 2,497,120 shares of Class A common stock (34.2% of the
outstanding) and 1,707,952 shares of Class B common stock (12.6% of the
outstanding).
Set forth in the following table are the beneficial holdings as of August
15, 1996, of the Company's Class A common stock and Class B common stock on the
basis described above of each person, including nominees for election as
directors, known to the Company who may be deemed to own more than 5% of either
class of the Company's outstanding shares, of all other nominees for election as
directors, and of all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(A)(B)
------------------------------------
SOLE VOTING SHARED
AND VOTING AND
DISPOSITIVE DISPOSITIVE PERCENT
NAME POWER POWER OF CLASS
- ------------------------------------------------------- ----------- ----------- --------
<S> <C> <C> <C> <C>
HOLDERS, INCLUDING NOMINEES FOR
ELECTION AS A DIRECTOR, OF MORE
THAN 5% OF THE OUTSTANDING
SHARES OF EITHER CLASS
NOMINEES FOR ELECTION AS A DIRECTOR:
Thomas L. Habig(c)(d)............................. Class A 55,946 1,131,395 16.3%
1600 Royal Street Class B 49,828 1,086,180 8.4%
Jasper, Indiana 47549
Douglas A. Habig(c)............................... Class A 462,994 1,063,818 20.9%
1600 Royal Street Class B 158,912 1,066,708 9.1%
Jasper, Indiana 47549
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(A)(B)
------------------------------------
SOLE VOTING SHARED
AND VOTING AND
DISPOSITIVE DISPOSITIVE PERCENT
NAME POWER POWER OF CLASS
- ------------------------------------------------------- ----------- ----------- --------
<S> <C> <C> <C> <C>
A316,3821,131,39519.8%1600 Royal Street Class B 127,860 313,884 3.3%
Jasper, Indiana 47549
James C. Thyen(c)................................. Class A 91,135 None 1.2%
1600 Royal Street Class B 88,519 772,296 6.4%
Jasper, Indiana 47549
OTHERS:
Arnold F. Habig(d)................................ Class A 448,488 664,605 15.2%
1600 Royal Street Class B 287,371 30,182 2.3%
Jasper, Indiana 47549
The Kimball International, Inc.................... Class A None None None
Retirement Plan Class B 772,296 None 5.7%
Springs Valley Bank & Trust Co. -- Trustee
1500 Main Street
Jasper, Indiana 47546
Patricia H. Snyder(f)............................. Class A 1,796 None (e)
4011 Fairfax Road Class B 650,000 112,500 5.6%
Evansville, Indiana 47710
Quest Advisory Corp(g)............................ Class A None None None
1414 Avenue of Americas Class B 761,290 None 5.6%
New York, New York 10019
A. C. Sermersheim Family.......................... Class A 405,500 None 5.6%
Limited Partnership(h) Class B 186,788 None 1.4%
1113 West 14th Street
Jasper, Indiana 47546
OTHER NOMINEES:
Ronald J. Thyen(d)................................ Class A 115,237 None 1.6%
Class B 63,213 None (e)
Dr. Jack R. Wentworth............................. Class A None None None
Class B 600 None (e)
John T. Thyen(d).................................. Class A 133,055 None 1.8%
Class B 47,506 None (e)
Brian K. Habig(d)................................. Class A 140,751 None 1.9%
Class B 28,072 None (e)
Gary P. Critser................................... Class A 950 None (e)
Class B 31,901 1,870 (e)
Christine M. (Tina) Vujovich...................... Class A None None None
Class B 350 None (e)
All Executive Officers and Directors as a Group (11
persons)(c)(d)....................................... Class A 1,764,938 732,182 34.2%
Class B 884,132 823,820 12.6%
</TABLE>
- ---------------
(a) Includes shares owned by spouse and children living in the household of the
individuals listed. 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.
(b) 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 reported and
percentages are calculated on an unconverted basis, and based on shares
outstanding as of August 15, 1996.
3
<PAGE> 6
(c) Thomas L. Habig, Douglas A. Habig and James C. Thyen are among members of
the Advisory Committee of the Company's Retirement Plan. The Plan owns
772,296 shares of Class B common stock. The Committee has the power to
instruct the Trustee as to the voting and disposition of these shares. The
shares held by the Plan are included in shares shown in the above table.
(d) Class B shares include the following shares, including stock appreciation
rights, subject to acquisition by exercise of stock options within sixty
days; Thomas L. Habig 11,500 shares; John B. Habig, Ronald J. Thyen, John T.
Thyen, and Arnold F. Habig 9,500 shares each; Brian K. Habig 3,500 shares;
and all executive officers and directors as a group 53,000 shares. The
percentage of Class B Share Owners by each person, or group, are determined
by including in the number of Class B shares outstanding those Class B
shares issuable to such person or group, assuming exercise of stock options
within sixty days.
(e) Totals are under one percent of the outstanding class of stock.
(f) This information is derived from notification received by the Company on
Schedule 13G and other communications.
(g) This information is derived from notification received by the Company on
Schedule 13G and other communications. Information was received regarding
Quest Advisory Corp. (Quest), Quest Management Company (QMC) and Mr. Charles
M. Royce indicating Mr. Royce may be deemed to be a controlling person of
Quest and QMC, and as such, may be deemed to beneficially own shares of
Class B Common Stock.
(h) This information is derived from notification received by the Company on
Schedule 13D. As disclosed in the Schedule 13D, Jean M. Hackman, Shirley A.
Lewis and Ronald J. Sermersheim each have joint voting and dispositive power
of the shares listed. In addition, Ms. Hackman, Ms. Lewis and Mr.
Sermersheim each vote individually and own on a direct basis a total of
200,728 shares of Class A Common Stock and 567,804 shares of Class B Common
Stock.
ELECTION OF DIRECTORS
At the annual meeting, ten directors, constituting ten of the eleven Board
of Directors of the Company, are to be elected to hold office until the next
annual meeting of Share Owners, or until their successors are duly elected and
qualified. One seat on the Board is vacant because of the death of Leonard B.
Marshall, Jr. A search for a replacement is in process. Holders of shares of the
Company's Class A common stock are entitled to elect nine directors, and holders
of shares of the Company's Class B common stock are entitled to elect one
director. Each nominee is now a director of the Company. If any such nominee
shall be unable 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 proxies. Management has no reason to believe that any such nominee will be
unable to serve. The nominees are:
4
<PAGE> 7
NOMINEES FOR ELECTION AS DIRECTORS
BY HOLDERS OF CLASS A COMMON STOCK
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE
- ------------------------------ ---------------------------------------------------- --------
<S> <C> <C>
Thomas L. Habig(a)(c)......... Chairman of the Board of Directors of the Company; 1950
age 68
Douglas A. Habig(a)........... President and Chief Executive Officer of the 1973
Company; also Director of NBD Indiana, Inc., a
banking subsidiary of NBD Bank N.A.; age 49
James C. Thyen(b)............. Senior Executive Vice President, Chief Financial and 1982
Administrative Officer and Treasurer of the Company;
age 52
John B. Habig(a).............. Senior Executive Vice President, Operations Officer, 1956
Assistant Secretary of the Company; age 63
Ronald J. Thyen(b)............ Senior Executive Vice President, Operations Officer 1973
of the Company; age 59
Brian K. Habig(c)............. Vice President, General Manager, Office Furniture, 1992
Strategic Operations Planning and Administration;
age 39
John T. Thyen(b).............. Senior Executive Vice President, Marketing and Sales 1990
of the Company; age 57
Gary P. Critser............... Senior Executive Vice President, Chief Accounting 1990
Officer and Secretary of the Company; age 59
Christine M. (Tina) 1994
Vujovich.................... Vice President, Worldwide Marketing, Bus and Light
Commercial Automotive and Environmental Management,
Cummins Engine Co., Inc.; also Director of Irwin
Union Bank, a banking subsidiary of Irwin Financial
Corporation; age 44
</TABLE>
NOMINEE FOR ELECTION AS DIRECTOR
BY HOLDERS OF CLASS B COMMON STOCK
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE
- ------------------------------ ---------------------------------------------------- --------
<S> <C> <C>
Dr. Jack R. Wentworth......... Arthur M. Weimer Professor of Business 1984
Administration, Indiana University; former Dean of
School of Business, Indiana University; also
Director of Lone Star Industries and Market Facts,
Inc.; age 68
</TABLE>
- ---------------
(a) Thomas L. Habig, Douglas A. Habig and John B. Habig are brothers.
(b) Ronald J. Thyen, James C. Thyen and John T. Thyen are brothers.
(c) Brian K. Habig is the son of Thomas L. Habig.
Each of the nominees who is currently a director of the Company has been
employed for more than the past five years by the same employer in the capacity
shown above, or some other executive capacity, except for Christine M. Vujovich
and Dr. Jack R. Wentworth. During June 1993, Dr. Wentworth retired from the
position of Dean of School of Business, Indiana University, a position held
since 1984. Dr. Wentworth is now the Arthur M. Weimer Professor of Business
Administration, Indiana University. Ms. Vujovich has been an employee of Cummins
Engine Co., Inc., of Columbus, Indiana, since 1978. Ms. Vujovich has held
various management positions with Cummins since 1983. From 1985 to 1989, Ms.
Vujovich was Vice President -- Customer Engineering and was named Vice
President, Product Planning and Environmental Management in 1989. In 1996, Ms.
Vujovich was appointed Vice President of Worldwide Marketing, Bus and Light
Commercial Automotive and Environmental Management of Cummins.
5
<PAGE> 8
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES
Your Board has four standing Committees: the Executive Committee, the Audit
Committee, the Compensation Committee and the Stock Option Committee. The
Executive Committee currently consists of Thomas L. Habig, Douglas A. Habig,
James C. Thyen, John B. Habig, Ronald J. Thyen, John T. Thyen and Gary P.
Critser. The by-laws of the Company provide, except to the extent limited by
Indiana law, that the Executive Committee may exercise during the intervals
between the meetings of the Board all powers of the Board of Directors with
reference to the conduct of the business of the Company. At the Board of
Directors meetings, all actions of the Executive Committee are reaffirmed.
During the fiscal year this Committee met six times. The Board of Directors met
six times during fiscal year 1996.
The Audit Committee at this time consists of two members of the Board: Dr.
Jack R. Wentworth (Chairperson) and Christine M. Vujovich, who are not salaried
employees of the Company and who are, in the opinion of the Board of Directors,
free from any relationship that would interfere with the exercise of independent
judgment as a Committee member. One seat on the Committee is vacant because of
the death of Leonard B. Marshall, Jr. The Committee, which met three times
during the 1996 fiscal year, annually recommends to the Board of Directors the
appointment of a firm of independent auditors and reviews with the independent
auditors and approves the plan and scope of their audit for each year. The
Committee also reviews with the independent auditors the adequacy of internal
accounting and financial controls and reviews directly with the Company's Audit
and Management Services Department the activities of the department and the
results of their internal control reviews and tests. The Committee receives
periodic written reports directly from the Company's Audit and Management
Services Department between meeting dates. In addition, the Committee reviews
and approves fees paid to the independent auditors for both audit and non-audit
services.
The members of the Compensation Committee are: Douglas A. Habig
(Chairperson), Dr. Jack R. Wentworth, James C. Thyen and Gary P. Critser. Mr.
Marshall was also a member of the Committee. It is planned that Christine M.
Vujovich will be appointed a member of the Committee at the October 1996
directors' reorganization meeting as Mr. Marshall's replacement. The Committee's
responsibilities consist of making all determinations with respect to the
compensation of the Chief Executive Officer and to establish and maintain
general compensation policies with respect to all other executive officers of
the Company. Members of the Committee also serve as the Stock Option Committee
of the Company's 1987 Stock Incentive Program. The Compensation Committee met
once and the Stock Option Committee met twice during fiscal year 1996.
All directors receive compensation of $16,000 per year. Directors who are
not Company employees receive an additional $2,000 for each meeting attended.
Directors who are Company employees receive an additional $1,500 for each
meeting attended. The Chairperson of the Board of Directors' Audit Committee
receives $3,500 per meeting, and other Audit Committee members receive $2,500
per meeting. Members of the Board of Directors' Compensation Committee who are
not Company employees receive $1,000 per meeting. Members of the Executive
Committee and the Stock Option Committee receive no additional compensation.
The Company has approved and now proposes for Share Owner action the 1996
Director Stock Compensation and Option Plan which will allow Directors to
receive their annual retainer and meeting fees in shares of Class B Common Stock
and receive grants of nonqualified stock options in connection with that
election. For more information concerning this proposal see "Proposal to Approve
the Kimball International, Inc. 1996 Director Stock Compensation and Option
Plan" found elsewhere in this Proxy Statement.
All directors during fiscal year 1996 attended in excess of 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings held by all committees of the Board on which the
directors served.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the periods indicated, the aggregate cash
compensation, including incentive compensation, paid by the Company to the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company during the years ended June 30, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2)
- ----------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Habig............. 1996 $264,600 $258,045 $ 36,271 6,000(3) $ 28,868
President and Chief 1995 247,800 243,503 34,965 6,000(3) 24,645
Executive Officer 1994 232,200 195,133 29,841 5,500(3) 13,649
Thomas L. Habig.............. 1996 $241,300 $224,764 $ 40,018 6,000 $ 31,009
Chairman of the Board 1995 227,600 211,585 38,434 6,000 25,850
1994 217,800 167,501 34,642 5,500 13,649
James C. Thyen............... 1996 $228,200 $215,074 $ 40,632 5,000(3) $ 24,775
Senior Executive 1995 211,400 199,726 38,415 5,000(3) 21,507
Vice President, 1994 195,800 153,774 29,055 4,500(3) 13,649
Chief Financial and
Administrative Officer,
Treasurer
John B. Habig................ 1996 $215,200 $192,387 $ 43,956 5,000 $ 26,050
Senior Executive 1995 198,700 179,534 44,021 5,000 21,081
Vice President, 1994 185,700 140,488 37,551 4,500 13,649
Operations Officer,
Assistant Secretary
John T. Thyen................ 1996 $215,200 $190,164 $ 32,753 5,000 $ 23,876
Senior Executive 1995 198,700 177,233 33,804 5,000 20,245
Vice President, 1994 185,700 138,421 32,074 4,500 13,649
Marketing and Sales
</TABLE>
- ---------------
(1) Includes director fees, executive tax assistance program, and along with
other officers and certain employees, supplemental group medical and life
insurance, and automotive allowances.
(2) For 1996 includes on behalf of the named individuals All Other Compensation
as follows:
<TABLE>
<CAPTION>
COMPANY PAYMENTS
TO RETIREMENT AND SPLIT-DOLLAR
SUPPLEMENTAL EMPLOYEE LIFE INSURANCE
RETIREMENT PLAN PREMIUM VALUE
--------------------- --------------
<S> <C> <C>
Thomas L. Habig............................... $23,821 $7,188
Douglas A. Habig.............................. $26,549 $2,319
James C. Thyen................................ $22,396 $2,379
John B. Habig................................. $20,949 $5,101
John T. Thyen................................. $20,642 $3,234
</TABLE>
Payments in 1994 on behalf of the named individuals were only to the
Company Retirement Plan.
(3) Each of the persons indicated was granted a stock ownership equivalent award
payable solely in cash five years after date of grant in an amount equal to
the appreciation, if any, in the fair market value of the number of shares
of Class B common stock of the Company, indicated above, from date of grant
to five years after date of grant, subject to earlier payout if the
individual dies, becomes totally disabled or retires at age 62 or later.
7
<PAGE> 10
CASH BONUS PLANS
Your Company has a Profit Sharing Bonus Plan for all eligible salaried
employees in which the executive officers participate. Salaries are paid for
individual value-added efforts. By contrast, profit sharing bonuses are paid
based directly upon the Company's financial success and will vary with the level
of that success. The amount of bonus earned is based upon a predetermined Return
on Assets (ROA) target of a business unit, group of units or the Company. ROA is
benchmarked against the ROAs reported in the annual Fortune 500 listing of the
largest U.S. corporations. The plan is structured allowing for a greater portion
of the total cash compensation at risk commensurate with the individual's level
of responsibility. The plan is also designed to pay bonus earned as an
increasing percent of salary the higher the ROA achieved. Once a minimum
threshold of ROA is attained, eligible employees may earn bonuses from 4% to
100% of salary, while officers, including executive officers, may earn a bonus
from 20% to 100% of salary. The plan is structured whereby business unit and
group managers may earn a higher bonus as a percent of salary than officers,
including executive officers. Because no single incentive plan is perfect and
special situations occur where an individual achievement may not be adequately
recognized by the Profit Sharing Bonus Plan, there is a supplemental bonus plan,
reviewed and approved on an annual basis by the Board of Directors, where a
maximum of 2.4% of the Company's overall annual net income (before bonuses to be
paid pursuant to the Company's Profit Sharing Bonus Plan) may be designated as
supplemental bonuses to those eligible participants at the discretion of the
Chairman of the Board, and President and Chief Executive Officer. The 2.4% is an
effective 1.5% on a comparative after tax basis. However, any award to the Chief
Executive Officer under this supplemental bonus plan must be approved and
awarded by the Board of Directors' Compensation Committee.
Under the Company's bonus plans, with certain exceptions, bonuses are
accrued annually and paid in five installments over a twelve-month period in the
next succeeding fiscal year. Except for provisions relating to retirement, death
and permanent disability, individuals must be actively employed on each payment
date to receive the bonus.
RETIREMENT PLANS
The Company maintains a defined contribution retirement plan with a 401(K)
provision for all eligible domestic employees. The plan provides for voluntary
employee contributions as well as a discretionary annual Company contribution as
determined by the Board of Directors based on income of the Company as defined
in the plan. Each eligible employee's company contribution is defined as a
percent of eligible compensation, the percent being identical for all eligible
employees, including executive officers. Participant accounts are fully vested
after seven years of participation. All executive officers were fully vested at
June 30, 1996. The Retirement Trust account is fully funded and fully vested.
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. For employees who are eligible, there is a
non-qualified, unfunded Supplemental Employee Retirement Plan (SERP) in which
the Company contributes to the account of each individual an amount equal to the
reduction in the contribution under the defined contribution retirement plan
arising from the provisions of the 1986 Tax Reform Act.
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1996
--------------------------------------------------- POTENTIAL REALIZED
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SAR EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO OR PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES STRIKE THE 5-YR OPTION/SAR TERM(1)
OPTIONS/SAR IN FISCAL PRICE EXPIRATION ------------------------------------
NAME GRANTED (#) YEAR ($) DATE 0% ($) 5% ($) 10% ($)
- ------------------------------- ----------- -------- ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas L. Habig..... 6,000 1.9% $25.54 8/22/00 0 $42,337 $93,555
Douglas A. Habig.... 6,000(4) 1.9% $25.54 8/22/00 0 $42,337 $93,555
John B. Habig....... 5,000 1.6% $25.54 8/22/00 0 $35,281 $77,963
James C. Thyen...... 5,000(4) 1.6% $25.54 8/22/00 0 $35,281 $77,963
John T. Thyen....... 5,000 1.6% $25.54 8/22/00 0 $35,281 $77,963
8/22/00
through
All Optionees....... 308,100 100.0% $26.18(2) 3/30/01 0 $2,228,503 $4,924,409
All Share
Owners(3)......... N/A N/A N/A N/A 0 $150,531,000 $332,634,000
All Optionees'
potential gain as
a percent
of all Share Owner
gain.............. 1.5% 1.5%
</TABLE>
- ---------------
(1) Potential realizable values are based upon assumed rates of appreciation
prescribed by the Securities and Exchange Commission. Under these rules it
is assumed the Company's Class B common stock will appreciate in value from
the date of grant to the end of the award term (5 years from date of grant)
at annualized rates of 5% and 10%. The 5% and 10% rates prescribed by the
Securities and Exchange Commission are not intended to forecast possible
future appreciation of the Company's stock.
(2) Weighted average per share exercise price of all options issued in fiscal
year ended June 30, 1996.
(3) The amounts shown represent a hypothetical return to all holders of the
Company's common stock, assuming that all Share Owners purchased their
shares at a per share purchase price of $26.18, the weighted average of the
exercise prices for all options granted during the period, and that all
Share Owners hold the shares continuously for a 5 and 10-year period. The
amounts were computed based upon 20,811,745 shares outstanding at June 30,
1996. The computed increase in market value to common stock Share Owners is
shown for comparative purposes only. It is not a prediction of future stock
appreciation.
(4) Securities shown are stock ownership equivalents.
Your Company's 1987 Stock Incentive Program (1987 Plan) was approved by
Share Owners at the October 1987 Annual Meeting. The 1987 Plan permits a variety
of benefits consisting of Incentive Stock Options, Non-Qualified Stock Options,
Stock Appreciation Rights, Restricted Stock Awards and Performance Shares. All
Incentive Stock and Non-Qualified Stock Options issued were granted at 100% of
fair market value on date of grant. Options generally become exercisable two
years from date of grant and expire five years from date of grant. The options
have certain provisions relating to termination of employment by reason of
disability or retirement and provisions regarding death of the option's holder.
Under certain circumstances, the options may be forfeited.
The Company has approved and now proposes for Share Owner action the
Kimball International, Inc. 1996 Stock Incentive Program which basically
provides the same benefits as described above with respect to the 1987 Plan. For
more information concerning this proposal see "Proposal to Approve the Kimball
International, Inc. 1996 Stock Incentive Program" found elsewhere in this Proxy
Statement.
Options issued during 1996 include 257,700 shares of Incentive Stock
Options, 32,500 shares of Non-Qualified Stock Options with Stock Appreciation
Rights and 17,900 shares of stock ownership equivalent
9
<PAGE> 12
awards. Shares issued to Thomas L. Habig, John B. Habig and John T. Thyen are
Non-Qualified Stock Options with Stock Appreciation Rights. Shares issued to
Douglas A. Habig and James C. Thyen are stock ownership equivalent awards. As
members of the Stock Option Committee, these two individuals are not eligible to
participate in the 1987 Stock Incentive Plan. Provisions of the stock ownership
equivalent awards are described elsewhere in this proxy statement.
Stock options and stock ownership equivalent awards only produce value to
executives if the price of your Company stock appreciates, thereby increasing
the link of interest of executives with those of Share Owners.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect to the named
officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of this fiscal year:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT YEAR
ACQUIRED ON AT YEAR END 1996 (#) END 1996 ($)(1)
EXERCISE VALUE ------------------------------ ------------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Habig....... None None 5,500 12,000 None $31,620
Douglas A. Habig...... None None None 17,500(2) None $31,620
John B. Habig......... None None 4,500 10,000 None $26,350
James C. Thyen........ None None None 14,500(2) None $26,350
John T. Thyen......... None None 4,500 10,000 None $26,350
</TABLE>
- ---------------
(1) Based on the NASDAQ quoted closing price as published in the Wall Street
Journal for the last business day of the fiscal year ($27.625 per share).
(2) Securities shown are stock ownership equivalents.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
Your Company applies a consistent philosophy to compensation for all
employees, including senior management. The goal of the Compensation Program is
to align compensation with business objectives and performance as a key link in
the achievement of the Company's Mission. The Committee's responsibility as
delegated by the Board of Directors is to establish the general compensation
policies with respect to the Company's executive officers and to make all
determinations with respect to the compensation of the Company's Chief Executive
Officer. The members of the Committee are also members of the Stock Option
Committee of the Company's 1987 Stock Incentive Program.
COMPENSATION PHILOSOPHY
Since its founding, Kimball International has linked all employees'
compensation to the financial success of the Company. Through the use of
incentives, including commissions, profit sharing bonuses, a defined
contribution retirement plan funded in part through a percentage share of
corporate profits, retirement plan trust investments in Company stock, and a
stock option plan, all employees are linked in a common interest with Share
Owners in the Company's short and long-term performance. Total compensation is
viewed as more than cash payments and unrelated pieces. The total compensation
package is planned and managed to keep various elements of compensation in
balance to help maintain the link of a common interest with Share Owners.
10
<PAGE> 13
This basic philosophy is acknowledged in your Company's Mission and Guiding
Principles communicated to all employees which state in part:
"Profits are the ultimate measure of how efficiently and effectively
we serve our customers and are the only true source of long-term job
security. Profitability and financial resources give us the freedom to
shape our future and achieve our vision."
and
"We want employees to share in their Company's success, both
financially and through personal growth and fulfillment."
Our philosophies are translated into practice through specific compensation
plans. In this regard, every Kimball International employee has a portion of his
or her compensation linked to Company performance.
Most production employees are paid incentives based upon units of
production. Compensation rises and falls with success in improving
productivity and production processes. Holiday and vacation compensation is
tied directly to incentive compensation.
Field sales personnel compensation includes commissions related to
sales. Compensation rises and falls with success in making sales.
Salaried employees at all levels participate in a common Profit
Sharing Bonus Plan. Basing goals on external benchmarks assures a
consistent focus of providing excellent returns on the investments of our
Share Owners. Further, the plan places a proportionately higher share of
compensation at risk at each level of management.
Key personnel participate in the 1987 Stock Incentive Program,
strengthening the link to a common interest with Share Owners.
The Retirement Plan for all employees is funded in part through
Company contributions directly related to Company profitability. In
addition, all employees who are eligible to participate in the plan are
indirectly Share Owners through the 772,296 shares of Company stock held in
the Retirement Trust.
Combining the Profit Sharing and Supplemental Bonus Plans for short-term
incentive and the 1987 Stock Incentive Plan for long-term incentive, a total of
approximately 125 managers, including senior management, have in excess of 50%
of their total potential compensation tied to Company performance related to
profitability and Share Owners' returns.
The Committee believes that your Company's historical and ongoing strategy
of strongly linking a significant portion of compensation of all employees to
Company financial performance is a competitive advantage and serves the
interests of Share Owners by enabling employees to share in Company risk and
success. It is the Committee's intent to continue this strategy, refining
programs consistent with changing business needs, to assure a continuing
commitment to financial success.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
In the context of historical practice, the annual salary of the CEO is
based upon numerous subjective factors, including responsibility level, overall
conduct of corporate affairs and leadership in progress towards achieving
strategic objectives. The Committee does not target any specific quartile of
public survey data for any component of the CEO's total compensation, nor
utilize any specific target or formula. While the Committee does review
compensation of CEO's of other manufacturing companies of similar size in sales,
there is no special attempt to set Mr. Habig's compensation in any particular
relationship to the comparative data. In consultation with Thomas L. Habig,
Chairman of the Board (and with the CEO absent from this portion of the meeting
and not voting), the Committee, based on factors discussed above, unanimously
increased Douglas A. Habig's salary during July 1995 from an annualized base of
$249,600 to $265,200.
Under your Company's Profit Sharing Bonus Plan described elsewhere in this
Proxy Statement, the CEO's bonus for 1996 amounted to 57% of 1996 salary, while
under this plan the percent earned was 59% and
11
<PAGE> 14
53% in 1995 and 1994 respectively. Under the Supplemental Bonus Plan also
described elsewhere herein, for 1996 the Committee, in consultation with Thomas
L. Habig, Chairman of the Board (with the CEO absent from this portion of the
meeting and not voting), unanimously awarded Douglas A. Habig a bonus of
$105,000. Under this plan, Mr. Habig was awarded $95,000 in 1995 and $70,000 in
1994 respectively. These awards were based upon the Committee's subjective
evaluations of Mr. Habig's job performance and leadership in the planning and
implementation of the Company's strategic objectives which are both short and
long term in nature. Consideration was also given to the increase in net income
and related return on assets in the 1996 fiscal year. The Company's Chairman and
its Chief Executive Officer establish the salaries of the Company's other
executive officers.
As described elsewhere within this Proxy Statement, during your Company's
1996 fiscal year, the Stock Option Committee of the 1987 Incentive Stock Plan
granted options to key executive and other key employees. Because Mr. Habig is a
member of the Stock Option Committee, thus not eligible to participate in the
Stock Option Plan, the Committee unanimously awarded Mr. Habig 6,000 shares in
the form of stock ownership equivalents as described elsewhere in this Proxy
Statement. The Stock Ownership Equivalents Award issued to Mr. Habig was made in
coordination with stock options issued to other executives and key employees.
Options issued to the executives and other Company employees by the Stock Option
Committee were based on level of individual responsibility. Thus, taking into
consideration the cash bonus which can be earned under the Company's Profit
Sharing and Supplemental Bonus Plans and stock options or stock ownership
equivalents, over one-half of the total potential compensation of the CEO, as
well as the other four named executive officers, are tied directly into
performance related to profitability and your Company's stock price.
OTHER
The Committee has also considered the potential effect of the Revenue
Reconciliation Act of 1993 on executive compensation. The Committee believes
that in the foreseeable future, none of the Company's officers covered under the
law will have annual compensation in excess of $1 million. Thus, all
compensation will be deductible for tax purposes. The Committee will continue to
monitor your Company's compensation program in relation to the Act.
While your Company has no policy on stock ownership of key management
employees, the Committee is cognizant of the significant amount of shares of
your Company stock owned by the CEO and the other four reporting executive
officers, providing a strong link with the common interest of Share Owners in
the Company's long term success.
The Committee, in its June 1996 meeting, unanimously approved the profit
targets under the Company's 1997 fiscal year Profit Sharing Bonus Plan.
COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Douglas A. Habig (Chairperson) James C. Thyen
Dr. Jack R. Wentworth Gary P. Critser
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Douglas A. Habig is President and Chief Executive Officer of the Company
and a brother of Thomas L. Habig, Chairman of the Board, and John B. Habig,
Senior Executive Vice President and Assistant Secretary of the Company. James C.
Thyen, Senior Executive Vice President, Chief Financial and Administrative
Officer and Treasurer, is a brother of John T. Thyen and Ronald J. Thyen, Senior
Executive Vice Presidents of the Company. Gary P. Critser is a Senior Executive
Vice President, Chief Accounting Officer and Secretary of the Company. Dr. Jack
R. Wentworth is a director of the Company and is not an employee.
12
<PAGE> 15
Certain executive officers and directors of the Company, including Messrs.
Habig, Thyen and Critser, as a group, own beneficially (including shares held by
spouses and minor children of which beneficial ownership is disclaimed) 19.6% of
the outstanding shares of SVB&T Corp., the holding company of Springs Valley
Bank and Trust Co., French Lick and Jasper, Indiana ("the Bank"). In addition,
the Company's Retirement Trust owns beneficially 19.4% of the outstanding stock
of the holding company. The Bank is a principal depository of the Company. It
also serves and receives fees as trustee and administrator of various Company
employee benefit programs. The Company believes that the terms of the
above-described transactions with the Bank are as favorable as available from
other sources.
PERFORMANCE GRAPH
The graph below compares the cumulative total return to Share Owners on the
common stock of the Company from June 28, 1991, through June 28, 1996, the last
business day in the respective fiscal years, to the cumulative total return of
the S&P Midcap 400 Index and the NASDAQ U.S. Composite Index for the same period
of time. The Company does not believe that any other published industry or
line-of-business index adequately represents the current operations of the
Company or that it can identify a peer group that merits comparison. The graph
assumes $100 is invested in your Company stock and each of the two indexes at
the closing market quotations on June 28, 1991, and that dividends are
reinvested. The performances shown on the graph are not necessarily indicative
of future price performance.
<TABLE>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Kimball International, Inc. 100.0 113.8 144.1 118.1 143.2 150.3
S&P Midcap 400 Index 100.0 118.6 145.5 145.4 177.9 216.2
NASDAQ U.S. Composite Index 100.0 120.1 151.1 152.5 203.6 261.4
</TABLE>
13
<PAGE> 16
PROPOSAL TO APPROVE THE KIMBALL INTERNATIONAL, INC.
1996 STOCK INCENTIVE PROGRAM
BACKGROUND
Your Board of Directors believes that the success and future growth and
profitability of the Company depends in part on its ability to recruit and
retain outstanding individuals as employees and to furnish maximum incentive to
these employees to improve operations and increase profits by providing such
individuals with the opportunity to acquire Class B Common Stock of the Company
or to receive monetary payments based on the value of Class B Common Stock. Your
Board also believes it is important to strengthen the link of officers and key
employees to the common interests of Share Owners through a Stock Incentive
Program. In accordance with this belief, the Board of Directors has adopted and
recommends for Share Owner approval, the Kimball International, Inc. 1996 Stock
Incentive Program (the "Plan") to replace the 1987 Plan which expires next year.
The Plan will not become effective unless approved by the holders of a majority
of the outstanding shares of Class A Common Stock of the Company present or
represented at the meeting.
In structuring the Plan, the Board of Directors sought to provide for a
variety of awards that could be flexibly administered to carry out the purposes
of the Plan. This authority will permit the Company to keep pace with changing
developments in management compensation and make the Company competitive with
those companies that offer creative incentives to attract and keep key
management employees. The flexibility of the Plan will allow the Company to
respond to changing circumstances such as changes in tax laws, accounting rules,
securities regulations and other rules regarding benefit plans. The Plan grants
the administrators discretion in establishing the terms and restrictions deemed
appropriate for particular awards as circumstances warrant.
The following description of the Plan is a summary of its terms and is
qualified in its entirety by reference to the complete text of the Plan, a copy
of which is attached as Exhibit A to this Proxy Statement.
SHARES AVAILABLE
The Plan makes available for awards 2,100,000 shares of Class B Common
Stock, plus all shares remaining under the Company's 1987 Stock Option Plan
(approximately 963,000 shares). All of such shares may, but need not, be issued
pursuant to the exercise of incentive stock options. The maximum number of
option shares which may be awarded to any one participant during the term of the
Plan is 200,000 shares. If there is a lapse, expiration, termination or
cancellation of any option or right prior to the issuance of shares or the
payment of the cash equivalent thereunder, or if shares are issued and
thereafter are reacquired by the Company pursuant to rights reserved upon
issuance thereof, those shares may again be used for new awards under the Plan.
ADMINISTRATION
The Plan provides for administration by a committee (the "Committee")
designated by the Board. Among the Committee's powers are the authority to
interpret the Plan, establish rules and regulations for its operation, select
officers and other key employees of the Company and its subsidiaries to receive
awards, and determine the form, amount and other terms and conditions of awards.
The Committee also has the power to modify or waive restrictions on awards, to
amend awards and to grant extensions and accelerations of awards.
ELIGIBILITY OF PARTICIPATION
Officers and other key employees of the Company or any of its subsidiaries
and all directors of the Company are eligible to participate in the Plan. The
selection of participants from eligible employees is within the discretion of
the Committee. The estimated number of persons who are eligible to participate
in the Plan at this time is 275.
14
<PAGE> 17
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of
awards: (1) stock options, including incentive stock options and nonqualified
stock options; (2) stock appreciation rights; and (3) performance shares. Awards
may be granted singly or in combination as determined by the Committee.
STOCK OPTIONS
Under the Plan, the Committee may grant awards in the form of options to
purchase shares of the Class B Common Stock. The Committee will, with regard to
each stock option, determine the number of shares subject to the option, the
manner and time of the option's exercise and vesting, and the exercise price per
share of stock subject to the option. The exercise price of a stock option will
not be less than 100 percent of the fair market value of the Class B Common
Stock on the date the option is granted. The option price may, at the discretion
of the Committee, be paid by a participant in cash, shares of Class B Common
Stock owned by the participant for at least six months, or a combination thereof
as the Committee may deem appropriate.
STOCK APPRECIATION RIGHTS (SARS)
The Plan authorizes the Committee to grant an SAR in tandem with a stock
option. An SAR is a right to receive a payment equal to the appreciation in
market value of a stated number of option shares of Class B Common Stock from
the option exercise price to the market value on the date of SAR exercise.
An SAR may be granted either at the time of the grant of the related stock
option or at any time thereafter during the term of the stock option. Upon the
exercise of a stock option, any related SAR will be cancelled automatically to
the extent of the number of shares acquired through the stock option exercise.
PERFORMANCE SHARES
Performance shares are shares of Class B Common Stock which may be earned
by a participant, in whole or in part, if certain goals established by the
Committee (including net income, return on equity or assets, earnings per share,
cash flow, cost control and other corporate, divisional, personal or other
goals) are achieved over a period of time, not to exceed five years, established
by the Committee. If the minimum goal established is not achieved, no
performance shares will be delivered to the participant; if the maximum goal
established is achieved, 100% of the performance shares will be delivered to the
participant; and if the maximum goal is partially achieved, performance shares
may be delivered corresponding to the degree of achievement as determined by the
Committee. Partial achievement of the maximum goal shall result in a delivery
corresponding to the degree of achievement as determined by the Committee. The
Committee shall have the discretion to satisfy a Participant's performance
shares by delivery of cash or stock or any combination thereof. The number of
shares reserved for issuance under the Plan will be reduced by the number of
performance shares earned, even though a portion of the award is paid in cash.
OTHER TERMS OF AWARDS
The Plan provides that awards shall not be transferable otherwise than by
will or the laws of descent and distribution. The Committee shall determine the
treatment to be afforded to a participant in the event of termination of
employment for any reason including death, disability or retirement.
Notwithstanding the foregoing, the Committee may permit the transfer of an award
by a participant to members of the participant's immediate family or trusts or
family partnerships for the benefit of such persons.
The Committee may, by way of an award notice or otherwise, establish such
other terms, conditions, restrictions and/or limitations covering the grant of
the award as are not inconsistent with the Plan. The Board of Directors reserves
the right to amend, suspend or discontinue the Plan at any time, subject to the
rights of participants with respect to any outstanding awards. However, Share
Owner approval is needed to increase the number of reserved shares.
The Plan contains provisions for equitable adjustment of awards in the
event of a merger, consolidation, or reorganization, or issuance of shares by
the Company without new consideration.
15
<PAGE> 18
No benefit may be granted under the Plan after December 31, 2005.
FEDERAL TAX TREATMENT
Under current law, the following are U.S. federal income tax consequences
generally arising with respect to awards under the Plan.
A participant who is granted an incentive stock option does not recognize
any taxable income at the time of the grant or at the time of exercise.
Similarly, the Company is not entitled to any deduction at the time of grant or
at the time of exercise. If the participant makes no disposition of the shares
acquired pursuant to an incentive stock option before the later of two years
from the date of grant and one year from the date of exercise, any gain or loss
realized on a subsequent disposition of the shares will be treated as a
long-term capital gain or loss. Under such circumstances, the Company will not
be entitled to any deduction for federal income tax purposes.
A participant who is granted a nonqualified stock option will not have
taxable income at the time of grant, but will have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. The Company is entitled
to a tax deduction for the same amount.
The grant of an SAR will produce no U.S. federal tax consequences for the
participant or the Company. The exercise of an SAR results in taxable income to
the participant, equal to the difference between the exercise price of the
shares and the market price of the shares on the date of exercise, and a
corresponding tax deduction to the Company.
A participant who has been granted performance shares will not realize
taxable income at the time of the grant. When the performance is achieved, the
participant will recognize taxable income in an amount equal to the cash and the
fair market value of the shares actually received. The Company will be entitled
to a corresponding tax deduction.
OTHER INFORMATION
No awards have been granted under the Plan. The awards to be granted under
the Plan in 1997 are not determinable. For information concerning stock options
granted in 1996 under the Company's 1987 Stock Option Plan, see "Option Grants
In Last Fiscal Year" elsewhere in this Proxy Statement.
As of August 15, 1996, the closing price of the Company's Class B Common
Stock was $32.25.
At the August 13, 1996, Directors' meeting, the Board approved a plan to
repurchase up to one million shares of Class B Common Stock over a 3-year
period. Repurchased shares will become Treasury shares to be used for general
corporate purposes, including stock options. The shares purchased under the plan
could reduce the potential dilution of earnings per share arising from the
granting and exercise of stock options.
The affirmative vote of holders of a majority of the Class A Shares
represented and entitled to vote at the meeting is required for approval of the
Plan. Abstentions will count as a vote against the proposal, but broker nonvotes
will have no effect.
The Board of Directors recommends a vote FOR approval of Kimball
International, Inc. 1996 Stock Incentive Plan.
16
<PAGE> 19
PROPOSAL TO APPROVE THE KIMBALL INTERNATIONAL, INC.
1996 DIRECTOR STOCK COMPENSATION AND OPTION PLAN
BACKGROUND
The Board of Directors is proposing for Share Owner approval the Kimball
International, Inc. 1996 Director Stock Compensation and Option Plan (the
"Plan"). The purpose of the Plan is to strengthen the link to the common
interests of Share Owners as well as enable the Company to attract and retain
outstanding individuals to serve as members of the Board of Directors by
providing such persons opportunities to acquire shares of Class B Common Stock
of the Company.
The following description of the Plan is a summary of its terms and is
qualified in its entirety by reference to the complete text of the Plan, a copy
of which is attached as Exhibit B to this Proxy Statement.
DESCRIPTION OF PLAN
The Plan reserves 125,000 shares of Class B Common Stock for issuance to
members of the Board of Directors who elect to receive their annual retainer and
meeting fees in shares of Class B Common Stock, and for grants of non-qualified
stock options to those directors. All members of the Board of Directors are
eligible to participate in this Plan whether or not they are salaried officers
or employees of the Company or any subsidiary. If there is a lapse, expiration,
termination or cancellation of any option prior to the issuance of shares, those
shares may again be used for new awards under the Plan.
Each Director may make an election to receive all or a portion of his or
her annual retainer fee and periodic meeting fees in shares of Class B Common
Stock determined by dividing the retainer and meeting fees by the fair market
value of one share of the Company's Class B Common Stock. Each Director
receiving shares of common stock in accordance with the foregoing election shall
automatically be granted a nonqualified stock option on that date at an option
price equal to the fair market value of the Class B Common Stock on that date.
The number of shares subject to the option shall be equal to fifty percent of
the number of shares received by the Director on that date pursuant to the
election described above. In all instances fractions will be disregarded.
TERMS OF OPTION GRANTS
Each option is granted for a term of five years and becomes fully
exercisable after two years from the date of grant. The option price must be
paid in cash.
No option granted under the Plan shall be transferable, otherwise than by
will or, if the Director dies intestate, by the laws of descent and
distribution. All options shall be exercisable during the Director's lifetime
only by the Director or his legal representative. Notwithstanding the foregoing,
an option may be transferable to the Director's immediate family or trusts or
family partnerships for the benefit of such persons. In the event of a
Director's death or retirement, such options may be exercised within one year
after the Director's death or retirement.
The Board of Directors of the Company may suspend or terminate the Plan at
any time. The Board of Directors may also amend the Plan from time to time in
such respects as the Board of Directors may deem advisable, except for
increasing shares reserved under the Plan, which needs Share Owner approval.
The Plan contains provisions for automatic adjustment of awards in the
event of a merger, consolidation, or reorganization, or issuance of shares by
the Company without new consideration.
FEDERAL TAX TREATMENT
A Director will recognize ordinary income upon the payment of the retainer
and meeting fees in stock in an amount equal to the fair market value of the
stock on the date of receipt and the Company will be entitled to a deduction in
the same amount.
17
<PAGE> 20
A Director will not recognize taxable income at the time of the grant of
the option. The Director will recognize ordinary income upon the exercise of an
option in an amount equal to the excess of the fair market value of the stock on
the date of exercise of the option over the amount paid for the stock.
As a result of the optionee's exercise of an option, the Company will be
entitled to deduct as compensation an amount equal to the amount included in the
optionee's gross income. The Company's deduction will be taken in the Company's
taxable year in which the option is exercised.
OTHER INFORMATION
Based on total directors' retainer and meeting fees paid in fiscal year
1996, if all directors elect to receive shares in lieu of cash retainers and
meeting fees, under the Plan all directors on a cumulative basis would
automatically receive during fiscal year 1997 stock options totaling 4,829
shares of Class B Common Stock, based on the price of the Company's Class B
Common Stock of $32.25 per share as of the close of business on August 15, 1996.
The affirmative vote of holders of a majority of the Class A Shares
represented and entitled to vote at the meeting is required for approval of the
Plan. Abstentions will count as a vote against the proposal, but broker nonvotes
will have no effect.
The Board of Directors recommends a vote FOR approval of the Kimball
International, Inc. 1996 Director Stock Compensation and Option Plan.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent certified public accountants, examined the
Company's financial statements for the year ended June 30, 1996, and also for
the prior sixteen fiscal years. Representatives of Arthur Andersen LLP 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. Arthur Andersen LLP
has been selected as the Company's independent auditors for the 1997 fiscal
year.
By Order of the Board of Directors
GARY P. CRITSER, Secretary
September 11, 1996
18
<PAGE> 21
EXHIBIT A
KIMBALL INTERNATIONAL, INC.
1996 STOCK INCENTIVE PROGRAM
1. PURPOSE. The purpose of the Kimball International, Inc. 1996 Stock Incentive
Program (the "Plan") is (i) to align the personal interests of Plan
participants with those of the Share Owners of Kimball International, Inc.
(the "Company"), (ii) to encourage key individuals to accept or continue
employment with the Company and its subsidiaries, and (iii) to furnish
incentive to such employees to improve operations and increase profits by
providing such employees the opportunity to acquire Class B Common Stock of
the Company ("Common Stock") or to receive monetary payments based on the
value of such stock.
2. ADMINISTRATION. The Plan will be administered by a committee (the
"Committee") of the Board of Directors of the Company consisting of three or
more Directors as the Board may designate from time to time. The
determinations of the Committee shall be made in accordance with their
judgment as to the best interests of the Company and its Share Owners and in
accordance with the purpose of the Plan. A majority of members of the
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of the
Committee under the Plan may be made without notice or meeting of the
Committee, by a writing signed by a majority of the Committee members.
3. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance under
the Plan an aggregate of 2,100,000 shares of Common Stock of the Company,
which may be authorized but unissued or treasury shares. All of such shares
may, but need not, be issued pursuant to the exercise of Incentive Stock
Options. The maximum number of option shares which may be awarded to any
participant during the term of the Plan is 200,000 shares. If there is a
lapse, expiration, termination or cancellation of any Incentive Stock
Option, Nonqualified Stock Option, Stock Appreciation Right or Performance
Share award prior to the issuance of shares thereunder, or if shares are
issued under a stock option, Stock Appreciation Right or Performance Share
award and thereafter are reacquired by the Company pursuant to rights
reserved upon issuance thereof, those shares may again be used for new
benefits under this Plan. The shares hereby reserved are in addition to
shares previously reserved under the Company's 1987 Stock Incentive Stock
Program. Any shares of Common Stock reserved for issuance under the 1987
Program in excess of the number of shares as to which options or other
benefits were granted prior to the date of the approval of this Plan by the
Share Owners, plus any shares as to which options or other benefits granted
under the 1987 Program may lapse, expire, or terminate after such date shall
be available for issuance in connection with benefits under this Plan.
4. PARTICIPANTS. Participants will consist of such officers and other key
employees of the Company or any subsidiary as the Committee in its sole
discretion determines to have a major impact on the success and future
growth and profitability of the Company (and members of the Company's Board
of Directors who are not employees). Designation of a participant in any
year shall not require the Committee to designate such person to receive a
benefit in any other year or to receive the same type or amount of benefit
as granted to the participant in any other year or as granted to any other
participant in any year. The Committee shall consider such factors as it
deems pertinent in selecting participants and in determining the type and
amount of their respective benefits.
5. TYPES OF BENEFITS. Benefits under the Plan may be granted in any one or a
combination of (a) Incentive Stock Options; (b) Nonqualified Stock Options;
(c) Stock Appreciation Rights; and (d) Performance Shares, all as
hereinafter described.
6. INCENTIVE STOCK OPTIONS. Incentive Stock Options shall consist of stock
options to purchase shares of Common Stock at purchase prices not less than
100% of the fair market value of the shares on the date the option is
granted. Said purchase price may be paid by check or, in the discretion of
the Committee, by the delivery of shares of Common Stock of the Company then
owned by the participant or by certification
A-1
<PAGE> 22
of such ownership. Incentive Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee at grant; provided, however, that no Incentive Stock Option
shall be exercisable later than ten years after the grant date. The
aggregate fair market value (determined as of the time the option is
granted) of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any
calendar year (under all option plans of the Company and its parent and
subsidiary corporations) shall not exceed $100,000.
7. NONQUALIFIED STOCK OPTIONS. Nonqualified Stock Options shall consist of
stock options to purchase shares of Common Stock at purchase prices not less
than 100% of the fair market value of the shares on the date the option is
granted. Said purchase price may be paid by check or, in the discretion of
the Committee, by the delivery of shares of Common Stock of the Company then
owned by the participant or by certification of such ownership. Nonqualified
Stock Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee at grant;
provided, however, that no Nonqualified Stock Option shall be exercisable
later than ten years after the grant date.
8. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant a
Stock Appreciation Right in connection with any stock option granted
hereunder. Each Stock Appreciation Right shall be subject to such terms and
conditions consistent with the Plan as the Committee shall determine from
time to time, including the following:
(i) A Stock Appreciation Right may be made part of an option at the time of
its grant or at any time thereafter during the option term.
(ii) Each Stock Appreciation Right will entitle the holder to elect to
receive, in lieu of exercising the option to which it relates, an
amount (in cash or in Common Stock, or a combination thereof, all in
the sole discretion of the Committee) equal to 100% of the excess of:
(A) the fair market value per share of the Company's Common Stock on the
date of exercise of such right, multiplied by the number of shares
with respect to which the right is being exercised, over
(B) the aggregate option price for such number of shares.
(iii) Each Stock Appreciation Right will be exercisable at the time and to
the extent the option to which it relates is exercisable.
(iv) Upon exercise of a Stock Appreciation Right, the option (or portion
thereof) with respect to which such right is exercised shall be
surrendered and shall not thereafter be exercisable.
(v) Exercise of a Stock Appreciation Right will reduce the number of shares
purchasable pursuant to the related option and available for issuance
under the Plan to the extent of the number of shares with respect to
which the right is exercised, whether or not any portion of the payment
made upon exercise of such right is made in Common Stock of the
Company.
9. PERFORMANCE SHARES. Performance Shares shall consist of shares of Common
Stock which may be earned in whole or in part if certain goals established
by the Committee are achieved over a period of time established by the
Committee, but not in any event more than five years. The goals established
by the Committee may be based on net income, return on equity or assets,
earnings per share, cash flow, cost control and such other corporate,
divisional, personal or other goals as may be established by the Committee
in its discretion. In the event the minimum goal is not achieved at the
conclusion of the period, no delivery of shares shall be made to the
participant. In the event the maximum goal is achieved, 100% of the
Performance Shares shall be delivered to the participant. Partial
achievement of the maximum goal shall result in a delivery corresponding to
the degree of achievement as determined by the Committee. The Committee
shall have the discretion to satisfy a participant's Performance Shares by
delivery of cash or stock or any combination thereof. The number of shares
reserved for issuance hereunder shall be reduced by the number of
Performance Shares earned even though a portion of the award is paid in
cash.
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<PAGE> 23
10. FAIR MARKET VALUE. The fair market value of the Company's Common Stock at
any time shall be determined in such manner as the Committee may deem
appropriate, or as required by applicable law or regulation.
11. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued shares of
Common Stock without new consideration to the Company (such as by stock
dividends or stock splits), the total number of shares reserved for
issuance under this Plan and the number of shares covered by each
outstanding benefit shall be adjusted so that the aggregate
consideration payable to the Company, if any, shall not be changed.
(b) Notwithstanding any other provision of this Plan, and without affecting
the number of shares reserved or available hereunder, the Board of
Directors may authorize the issuance or assumption of benefits in
connection with any merger, consolidation, acquisition of property or
stock, or reorganization upon such terms and conditions as it may deem
appropriate.
(c) In the case of any merger, consolidation or combination of the Company
with or into another corporation, other than a merger, consolidation or
combination in which the Company is the continuing corporation and which
does not result in the outstanding Common Stock being converted into or
exchanged for different securities, cash or other property, or any
combination thereof (an "Acquisition"):
(i) any participant to whom a stock option has been granted under the
Plan shall have the right (subject to the provisions of the Plan and
any limitation applicable to such option) thereafter and during the
term of such option, to receive upon exercise thereof the
Acquisition Consideration receivable upon such Acquisition by a
holder of the number of shares of Common Stock which might have been
obtained upon exercise of such option or portion thereof, as the
case may be, immediately prior to such Acquisition;
(ii) any participant to whom a Stock Appreciation Right has been granted
under the Plan shall have the right (subject to the provisions of
the Plan and any limitation applicable to such right) thereafter
and during the term of such right to receive upon exercise thereof
the difference between the aggregate fair market value on the
applicable date (as set forth in such right) of the Acquisition
Consideration receivable upon such Acquisition by a holder of the
number of shares of Common Stock which might have been obtained
upon exercise of the option related thereto or any portion thereof,
as the case may be, immediately prior to such Acquisition and the
aggregate option price of such option or portion thereof; and
(iii) any participant to whom a Performance Share award has been granted
under the Plan shall have the right (subject to the provisions of
the Plan and any limitations applicable to such award) thereafter
and during the term of such award to receive on the date set forth
in such award, the Acquisition Consideration receivable upon such
Acquisition by a holder of the number of shares of Common Stock
which are covered by such award.
The term "Acquisition Consideration" shall mean the kind and amount of
shares of the surviving or new corporation, cash, securities, evidence of
indebtedness, other property or any combination thereof receivable in
respect of one share of Common Stock of the Company upon consummation of an
Acquisition.
12. NONTRANSFERABILITY. Each benefit granted under the Plan to an employee shall
not be transferable otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the participant's lifetime,
only by the participant. In the event of the death of a participant exercise
or payment shall be made only:
(i) by or to the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased
participant's rights under the benefit shall pass by will or the laws
of descent and distribution; and
A-3
<PAGE> 24
(ii) to the extent that the deceased participant was entitled thereto at
the date of his death.
Notwithstanding the foregoing, at the discretion of the Committee, a grant
of a benefit may permit the transfer of the benefit by the participant
solely to members of the participant's immediate family or trusts or family
partnerships for the benefit of such persons, subject to such terms and
conditions as may be established by the Committee.
13. TAXES. The Company shall be entitled to withhold the amount of any tax
attributable to any amounts payable or shares deliverable under the Plan
after giving the person entitled to receive such payment or delivery notice
as far in advance as practicable, and the Company may defer making payment
or delivery as to any benefit if any such tax is payable until indemnified
to its satisfaction. The Committee may, in its discretion and subject to
such rules as it may adopt, permit a participant to pay all or a portion of
the federal, state and local withholding taxes arising in connection with
the exercise of a Nonqualified Stock Option or Stock Appreciation Right or
receipt of Performance Shares, by electing to have the Company withhold
shares of Common Stock having a fair market value equal to the amount to be
withheld.
14. TENURE. A participant's right, if any, to continue to serve the Company and
its subsidiaries as an officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his or her designation as a participant
under the Plan.
15. DURATION, AMENDMENT AND TERMINATION. No stock option or other benefit shall
be granted after December 31, 2005; provided, however, that the terms and
conditions applicable to any option or benefit granted on or before such
date may thereafter be amended or modified by mutual agreement between the
Company and the participant or such other persons as may then have an
interest therein. Also, by mutual agreement between the Company and a
participant hereunder or under any other stock option plan of the Company,
options or rights may be granted to such participant in substitution and
exchange for, and in cancellation of, any benefits previously granted such
participant under this Plan or any other stock option plan of the Company.
The Board of Directors may amend the Plan from time to time or terminate the
Plan at any time. However, no action authorized by this paragraph shall
reduce the amount of any existing benefit or change the terms and conditions
thereof without the participant's consent. No amendment of the Plan to
increase the number of reserved shares shall be effective unless approved
within twelve months after the date of its adoption by the affirmative vote
of the shareholders entitled to vote.
16. SHARE OWNER APPROVAL. The Plan was adopted by the Board on June 11, 1996,
subject to Share Owner approval. The Plan and any benefits granted
thereunder shall be null and void if Share Owner approval is not obtained
within twelve months of the adoption of the Plan by the Board.
A-4
<PAGE> 25
EXHIBIT B
KIMBALL INTERNATIONAL, INC.
1996 DIRECTOR STOCK COMPENSATION AND OPTION PLAN
1. PURPOSE. The purpose of the Kimball International, Inc. 1996 Director Stock
Compensation and Option Plan (the "Plan") is to foster and promote the
long-term financial success of Kimball International, Inc. (the "Company")
by (i) aligning the personal interests of the directors with those of the
Company's Share Owners and (ii) attracting and retaining outstanding persons
to serve as directors by enabling them to participate in the Company's
growth through stock ownership.
2. SHARE RESERVED UNDER THE PLAN. There is hereby reserved for issuance under
the Plan an aggregate of 125,000 shares of Class B Common Stock of the
Company ("Common Stock") which may be authorized and unissued or treasury
shares. If there is a lapse, expiration, termination or cancellation of any
option granted under this Plan, all shares then subject to such option may
again be used under this Plan.
3. PARTICIPATION. Participation in this Plan is open to all members of the
Board of Directors of the Company, whether or not they are salaried officers
or employees of the Company or any subsidiary.
4. ELECTION TO RECEIVE ANNUAL RETAINER AND FEES IN SHARES OF COMPANY
STOCK. Each director may make an election to receive all or a 25%, 50% or
75% portion of his or her annual retainer fee and all or a 50% portion of
his or her periodic meeting fees in shares of Company Common Stock. An
election pursuant to this paragraph must be made in writing and delivered to
the Secretary of the Company before the first day of the director's first
annual retainer period for which the election is to be effective. Any
election shall be effective from the first day of the retainer period and
for successive retainer periods until terminated by the director by written
notice given not less than ten days prior to the commencement of a retainer
period. The election will entitle the director to receive on the first day
of any annual retainer period for which the election is effective a number
of shares of Company stock determined by dividing the retainer fee (or the
elected portion thereof) for that retainer period by the fair market value
of one share of the Company's Common Stock as of the first day of the
retainer period. In the event any person becomes a director other than at
the beginning of an annual retainer period, such person may make an election
before the date on which such person becomes a director and will receive all
or a portion of his or her retainer for the balance of such annual retainer
period in shares of Company stock determined by dividing all or the elected
portion of the retainer for the balance of such retainer period by the fair
market value of one share of the Company's Common Stock on the first day of
the period of service.
An election will also entitle the director to receive at the end of each
six-month period during which the election is effective a number of shares
of Company stock determined by dividing the meeting fees for the immediately
preceding six-month period by the fair market value of one share of the
Company's Common Stock as of the last day of such immediately preceding
six-month period.
Any fraction of a share shall be disregarded and the remaining amount of the
retainer or meeting fees shall be paid in cash.
For purposes of this paragraph, an annual retainer period shall begin
immediately after an annual meeting of the Share Owners of the Company and
end immediately before the succeeding annual meeting.
5. OPTIONS TO BE GRANTED UNDER THE PLAN. Each director receiving shares of
Common Stock on any date during an annual retainer period pursuant to
paragraph 4 hereof shall automatically be granted a non-qualified stock
option on that date, at an option price equal to the fair market value of
the Common Stock on that date. The number of shares subject to the option
shall be equal to 50% of the number of shares received by the director on
that date pursuant to paragraph 4 hereof. Any fraction of a share shall be
disregarded. The option shall be subject to the following terms and
conditions:
(i) No option may be exercised during the first two years following the date
of grant. Each option shall be fully exercisable on or after the second
anniversary of the date of grant. An option shall also become
B-1
<PAGE> 26
fully exercisable upon the death of a director while serving on the
Board or upon the retirement of a director from the Board at any time at
or after age 62 or with the consent of the Board.
(ii) No option may be exercised after termination of the director's service
on the Board for any reason other than death or retirement. Any option
granted under the Plan may be exercised for 12 months after retirement
or death. However, no option may be exercised more than five years from
the date the option is granted.
(iii) An option may be exercised by delivery of written notice of exercise to
the Secretary of the Company, accompanied by a check payable to the
order of the Company for the full purchase price of the shares being
purchased and any required tax withholding.
(iv) Any option shall not be transferable other than by will or the laws of
descent and distribution and shall be exercisable during the director's
lifetime only by the director or the director's guardian or legal
representative. If a director dies during the option period, any option
may be exercised by his or her estate or the person to whom the option
passes by will or the laws of descent and distribution. Notwithstanding
the foregoing, an option may be transferred to the director's immediate
family or trusts or family partnerships for the benefit of such persons.
(v) The grant of any option may also be subject to other provisions as the
Company deems appropriate, including, without limitation, provisions
imposing restrictions on resale or other disposition of the Common Stock
issuable upon exercise of any option and such provisions as may be
appropriate to comply with federal or state securities laws and stock
exchange requirements.
(vi) If the Company shall at any time change the number of issued shares of
Common Stock without new consideration to the Company (such as by stock
dividend or stock split), the total number of shares reserved for
issuance under this Plan and the number of shares covered by each
outstanding option shall be adjusted so that the consideration payable
to the Company and the value of each option shall not be changed. If,
during the term of any option, the Common Stock of the Company shall be
changed into another kind of stock or into securities of another
corporation or cash or other property, whether as a result of
reorganization, sale, merger, consolidation or other similar
transaction, the holder of any option shall thereafter be entitled to
receive upon its due exercise the securities, cash or other
consideration the holder would have been entitled to receive immediately
prior to the effective date of any such transaction for shares of Common
Stock not theretofore purchased which could have been acquired through
the exercise of such option.
6. ADMINISTRATION. This Plan is intended to be self-governing and requires no
discretionary action by any administrative body with respect to any
transaction under the Plan. All grants of options to directors under the
Plan shall be automatic and nondiscretionary and shall be made strictly in
accordance with the terms of the Plan. To the extent, if any, that questions
of administration arise, they shall be resolved by the entire Board of
Directors.
7. FAIR MARKET VALUE. For purposes of this Plan, fair market value shall mean
the average of the closing price of the Company's Common Stock during the
ten trading-day period ending on the valuation date and the five trading-day
period immediately after such date as reported on the NASDAQ National Market
System in the Wall Street Journal, Midwest Edition.
8. TAXES. The Company shall be entitled to withhold the amount of any tax
attributable to any shares deliverable under the Plan after giving the
person entitled to receive such delivery notice as far in advance as
practicable and the Company may defer making delivery, if any such tax is
payable, until indemnified to its satisfaction.
9. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board of Directors may
suspend or terminate the Plan at any time and may amend it from time to time
in such respects as the Board of Directors may deem advisable in order that
any grants thereunder shall conform to, or otherwise reflect, any change in
applicable laws or regulations, or to permit the Company or its directors to
enjoy the benefits of any change in applicable laws or regulations;
provided, however, that no amendment shall be made without
B-2
<PAGE> 27
Share Owner approval, which increases the number of shares reserved for issuance
hereunder. No such amendment, suspension or termination shall impair the rights
of directors under any outstanding options.
10. SHARE OWNER APPROVAL; TERM. This Plan was adopted by the Board of Directors
of the Company on August 13, 1996. The Plan shall be null and void if Share
Owner approval is not obtained at the 1996 annual meeting. The term of the
Plan shall be for a ten-year period from the date of Share Owner approval.
B-3
<PAGE> 28
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
(For Class A Stock)
KIMBALL INTERNATIONAL, INC.
I appoint Thomas L. Habig, James C. Thyen, and Douglas A. Habig, and each 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 21, 1996, 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 Standard Time, on Tuesday,
October 22, 1996, and at any adjournments thereof, with respect to the
following matters:
This Proxy when properly executed will be voted in the manner directed by the
undersigned share owner.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.
PLEASE MARK BOX [x]
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all the
to the contrary below) nominees listed
below
Thomas L. Habig, Douglas A. Habig, James C. Thyen, John B. Habig, Ronald J.
Thyen, Christine M. "Tina" Vujovich, Brian K. Habig, John T. Thyen, Gary P.
Critser
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
-------------------------------
2. Approve Kimball International, Inc. 1996 Stock Incentive Program
[ ] For [ ] Against [ ] Abstain
3. Approve Kimball International, Inc. 1996 Director Stock Compensation and
Option Plan
[ ] For [ ] Against [ ] Abstain
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(PLEASE DATE AND SIGN BELOW.)
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES
RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING.
Date: , 1996
------------------
------------------------------
(Signature)
------------------------------
(Signature)
(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.)
<PAGE> 29
KIMBALL INTERNATIONAL, INC.
PROXY
(FOR CLASS B STOCK)
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I appoint Thomas L. Habig, James C. Thyen, and Douglas A. Habig, or any one or
more 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 21, 1996 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 Standard
Time, on Tuesday, October 22, 1996 and at any adjournments thereof, with
respect to the following matters:
(Please date and sign on reverse side)
- --------------------------------------------------------------------------------
This Proxy when properly executed will be voted in the manner directed by the
undersigned share owner.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. PLEASE MARK
BOX [ ] OR [x]
1. ELECTION OF DIRECTOR 2. In their discretion,
the Proxies are
[ ] For the nominee listed DR. JACK R. WENTWORTH authorized to vote
upon such other
business as may
properly come before
the meeting.
[ ] WITHHOLD AUTHORITY
to vote for the nominee listed
THE UNDERSIGNED HEREBY REVOKES ANY PROXY
HERETOFORE GIVEN AND ACKNOWLEDGES RECEIPT
OF THE NOTICE AND PROXY STATEMENT FOR THE
ANNUAL MEETING.
Date: , 1996
------------------------------
------------------------------------------
(Signature)
------------------------------------------
(Signature)
(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.)