Document:

Exhibit 10.5 Employment Agreement

Exhibit 10.5
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into between Kimball Electronics, Inc., an Indiana corporation, and the undersigned executive employee ("Executive").

Recitals

A. Executive is a key executive employee of Kimball.

B. Kimball recognizes that Executive's contribution to the growth and success of Kimball has been substantial and that it is in the best interests of Kimball to assure Executive's continued services for the benefit of Kimball.

C. Kimball will suffer great loss and irreparable harm if Executive were to participate, directly or indirectly, as an owner, consultant, employee, manager, officer, director or in any other capacity in any business or venture in competition with Kimball or if he were to disclose Kimball's Trade Secrets and Confidential Information.

D. To induce Executive to remain in its employ, Kimball is willing to provide to Executive the compensation and benefits set forth in this Agreement.

E. To receive the benefits of Kimball employment for an indefinite period and the Change in Control benefits provided under this Agreement, Executive is willing to enter into the restrictive covenants and to undertake the other obligations contained in this Agreement.

Agreement

In consideration of the premises and the following mutual terms and conditions, Kimball and Executive agree as follows:

1. Employment At Will. Executive is employed by Kimball as an employee at will. Except as provided in Section 8, Executive may terminate his employment voluntarily at any time, with or without Good Reason, and Kimball may terminate Executive's employment at any time, with or without Cause, by providing the other party a Notice of Termination.

2. Acceleration of Rights and Payment upon Change in Control. 

(a) Incentive Plan Rights. As of the effective date of a Change in Control, (i) Executive's Options and related Stock Appreciation Rights awarded under the ________________, the ________________ and the ____ Stock Plan will become fully vested and exercisable; (ii) the Restricted Period will end for Executive's Restricted Shares awarded under the ____ Stock Plan; (iii) Executive's Deferred Share Units awarded under the ____ Stock Plan will become fully vested and payable; (iv) Executive will become entitled to payment for all Performance Shares or Performance Units awarded under the ____ Stock Plan; and (v) Executive will become entitled, under the ____ Profit Sharing Incentive Bonus Plan, to receive any bonus payments due for the fiscal year immediately preceding the Change in Control and a prorated share of bonus payments for the fiscal year in which the Change in Control occurs. As soon as practicable following the Change in Control, Kimball will make a single payment to Executive, equal to the aggregate Value of all benefits under the plans identified in this subsection (a), in the form of cash, Shares, or a combination of cash and Shares, as determined by the Compensation Committee of the Board of Directors, in its sole discretion. That single payment will constitute payment in full and complete satisfaction of Executive's rights and benefits under all of Executive's award agreements and the applicable plans.

(b) SERP Rights. As of the effective date of a Change in Control, Executive will become fully vested in the Makeup Contributions Account in the Supplemental Employee Retirement Plan and, without regard to Executive's payment elections previously made under that plan, will receive all benefit amounts under that plan in a single, lump-sum cash payment as soon as practicable following the Change in Control. 

(c) Acceleration Limitation. If a Change in Control occurs before January 1, ____, no payment that is accelerated pursuant to this Section shall be paid before January 1, ____. 

(d) Amendment of Award Agreements. To the extent that the provisions of this Section are inconsistent with the provisions of Executive's Award Agreements, Executive and Kimball hereby amend those Award Agreements to include the provisions of this Section, which supersede any inconsistent provisions of the Award Agreements. 

3. Retention Bonus. As an incentive for Executive to remain available to assist with transition matters following a Change in Control, Kimball will offer Executive a retention bonus equal to [forty percent (40%) for _______________] of Executive's annual salary in effect immediately before the Change in Control, payable in two equal installments. 

(a) Initial Retention Period. If Executive remains an employee of Kimball or its successor throughout the initial retention period of three months following the Change in Control, Kimball or its successor will pay to Executive one-half of the retention bonus as soon as practicable following the end of the initial retention period.

(b) Additional Retention Period. If Executive remains an employee of Kimball or its successor throughout an additional retention period of three months following the end of the initial retention period, Kimball or its successor will pay to Executive the remaining one-half of the retention bonus as soon as practicable following the end of the additional retention period.

(c) Termination. If Executive's employment is terminated, during the initial or additional retention period, by Kimball or its successor without Cause or by Executive for Good Reason, Kimball or its successor will pay to Executive any previously unpaid retention bonus in the same amounts and at the same times as if he had remained an employee of Kimball or its successor through the end of the additional retention period.

(d) Death or Disability. If Executive dies or incurs a Disability at any time during the initial or additional retention period, Kimball or its successor will pay to Executive, or to his estate in the event of death, a prorated portion of the retention bonus. The prorated retention bonus payment will be paid in an amount equal to the product of (i) the full retention bonus and (ii) a fraction, the numerator of which is the number of days from the first day of the initial retention period to the Termination Date, and the denominator of which is the aggregate number of days in both the initial and additional retention periods. Any prorated retention bonus amount unpaid as of the date of death or Disability will be paid at the end of the retention period in which the death or Disability occurs.

4. Compensation Upon Termination By Kimball Without Cause Or By Executive With Good Reason. If Executive's employment is terminated by Kimball without Cause or by Executive for Good Reason, Kimball will provide compensation and benefits to Executive on the following terms:

(a) Base Salary. As soon as practicable following the Termination Date, Kimball will pay Executive's full base salary through the Termination Date at the rate in effect on the date Notice of Termination is given.

(b) Bonus. As soon as practicable following the Termination Date, Kimball will pay Executive any deferred and unpaid bonus amounts due for the fiscal year immediately preceding his last day of employment and a prorated amount of the target bonus for the bonus period in which his last day of employment occurs. The prorated bonus payment will be in an amount equal to the product of (i) the bonus otherwise payable for the bonus period and (ii) a fraction, the numerator of which is the number of days from the first day of the bonus period to the last day of employment, and the denominator of which is the number of days in the bonus period.

(c) Enhanced Severance Pay. As soon as practicable following the Termination Date, Kimball will pay Executive, in lieu of benefits otherwise described in the Kimball Severance Benefits Plan, severance pay in the following amount:

(1) If Executive's last day of employment occurs outside a Control Termination Period, the severance pay amount will be equal to the sum of (i) Executive's annual base salary at the highest rate in effect during the three (3) years immediately preceding the last day of employment and (ii) the higher of either Executive's target bonus for the period in which the last day of employment occurs or Executive's average annual bonus award for the three annual bonus periods immediately preceding the last day of employment.

(2) If Executive's last day of employment occurs during a Control Termination Period, the severance pay amount will be equal to [two (2) for _____________] times the amount determined under (c)(1) above.

(d) Welfare and Fringe Benefits. As soon as practicable following the Termination Date, Kimball will pay Executive, in lieu of coverage for Executive and his dependents under Kimball's welfare and fringe benefit plans, the following reimbursement amount:

(1) If Executive's last day of employment occurs outside a Control Termination Period, the reimbursement amount will be equal to the product of (i) fifty thousand dollars ($50,000) and (ii) a fraction, the numerator of 

which is the Employment Cost Index, as published by the U.S. Bureau of Labor Statistics, for the completed calendar quarter immediately preceding Executive's Termination Date, and the denominator of which is the Employment Cost Index for the first calendar quarter of ____.

(2) If Executive's last day of employment occurs during a Control Termination Period, the reimbursement amount will be equal to [two (2) for _____________] times the amount determined under (d)(1) above.

(e) Outplacement Assistance. To assist Executive in obtaining replacement employment, Kimball will reimburse Executive for up to [$25,000 for _____________] of the costs of outplacement services during the first twelve months following the Termination Date.

(f) Acceleration of Rights and Payment. 

(1) Incentive Plan Rights. As of the Termination Date, (i) Executive's Options and related Stock Appreciation Rights awarded under the ___________________, the ____________________, and the ____ Stock Plan will become fully vested and exercisable; (ii) the Restricted Period will end for Executive's Restricted Shares awarded under the ____ Stock Plan; (iii) Executive's Deferred Share Units awarded under the ____ Stock Plan will become fully vested and payable; (iv) Executive will become entitled to payment for all Performance Shares or Performance Units awarded under the ____ Stock Plan; and (v) Executive will become entitled, under the ____ Profit Sharing Incentive Bonus Plan, to receive any bonus payments due for the fiscal year immediately preceding the Termination Date and a prorated share of bonus payments for the fiscal year in which the Termination Date occurs. As soon as practicable following the Termination Date, Kimball will make a single payment to Executive, equal to the aggregate Value of all benefits under the plans identified in this subsection (1), in the form of cash, Shares, or a combination of cash and Shares, as determined by the Compensation Committee of the Board of Directors, in its sole discretion. That single payment will constitute payment in full and complete satisfaction of Executive's rights and benefits under all of Executive's award agreements and the applicable plans.

(2) SERP Rights. As of the Termination Date, Executive will become fully vested in the Makeup Contributions Account in the Supplemental Employee Retirement Plan and, without regard to Executive's payment elections previously made under that plan, will receive all benefit amounts under that plan in a single, lump-sum cash payment as soon as practicable following the Termination Date. 

(3) Acceleration Limitation. If a Termination Date occurs before January 1, ____, no payment that is accelerated pursuant to this subsection shall be paid before January 1, _____.

(4) Amendment of Award Agreements. To the extent that the provisions of this subsection are inconsistent with the provisions of Executive's Award Agreements, Executive and Kimball hereby amend those Award Agreements to include the provisions of this subsection, which supersede any inconsistent provisions of the Award Agreements. 

5. Compensation Upon Other Termination of Employment. If Executive's employment is terminated by Kimball for Cause, by Executive without Good Reason, or because of death or Disability, Kimball will provide compensation and benefits to Executive, or to Executive's estate in the event of death, on the following terms:

(a) Termination by Kimball for Cause or by Executive without Good Reason. If Kimball terminates Executive's employment for Cause, or if Executive terminates his employment without Good Reason, Kimball will pay Executive's full base salary through his last day of employment at the rate in effect at the date that Notice of Termination is given.

(b) Death or Disability. In the event of Executive's death or Disability, Kimball will pay Executive's full base salary through the date of death or Disability.

(c) Other Benefit Programs. Executive shall also be entitled to: (i) benefits under Kimball's generally applicable welfare and retirement plans, in accordance with the respective terms of such plans; and (ii) Executive's rights under the ____ Profit Sharing Bonus Plan, the Supplemental Employee Retirement Plan, the _____________________, the _____________________, the ____ Stock Plan, and any other equity or incentive plan, in accordance with the respective terms of those plans.

6. Code Section 409A. Despite any other provisions of the Agreement to the contrary, any Deferred Compensation payments otherwise due under this Agreement will be paid in accordance with this Section.

(a) Post-Termination Payment Suspension. If as of the date his employment terminates, Executive is a "key employee" within the meaning of Code Section 416(i), without regard to paragraph 416(i)(5), and Kimball has stock that is publicly traded on an established securities market or otherwise, any Deferred Compensation payments otherwise payable because of employment termination will be suspended until the first day of the seventh month following the month in which the Executive's last day of employment occurs, and the Deferred Compensation payments in the seventh month will include all previously suspended amounts.

(b) Interpretation. This Agreement shall be interpreted and applied in a manner consistent with the standards for nonqualified deferred compensation plans established by Code Section 409A and its interpretive regulations and other regulatory guidance. To the extent that any terms of the Agreement would subject Executive to gross income inclusion, interest, or additional tax pursuant to Code Section 409A, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy, the applicable Code Section 409A standards.

(c) Supplemental Payment. If Executive incurs gross income inclusion, interest, or additional tax on Deferred Compensation payments pursuant to Code Section 409A, Kimball will make a supplemental payment to Executive in an amount sufficient to pay the income tax liability on the sum of those Deferred Compensation payments and the supplemental payment.

7. Parachute Payments. In the event that any Compensation Payment would be subject to the Excise Tax, Executive's benefits under this Agreement will be adjusted as provided in this Section.

(a) Additional Payment. Unless the Compensation Committee of the Board of Directors determines to the contrary, as provided under subsection (b), Executive will be entitled to receive an additional payment (a "Reimbursement Payment") in an amount equal to the Excise Tax imposed upon the Compensation Payments.

(1) The Professional Services Firm, at Kimball's expense, will make an initial determination as to whether a Reimbursement Payment is required and the amount of such Reimbursement Payment. The Professional Services Firm shall provide its determination, together with detailed supporting calculations and documentation to Kimball and Executive within thirty (30) days of the Termination Date. If the Professional Services Firm determines that no Excise Tax will be payable by Executive with respect to the Compensation Payments, it shall furnish Executive with an opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. The determination shall be binding, final and conclusive upon Kimball and Executive, subject to the application of paragraph (3) of this subsection.

(2) Kimball shall pay any Reimbursement Payment to Executive within five days of the receipt of the Professional Services Firm's determination. 

(3) If a Reimbursement Payment is paid that should not have been paid (an "Excess Payment"), or if a Reimbursement Payment is not paid that should have been paid (an "Underpayment"), the Excess Payment or Underpayment shall be corrected as provided in this paragraph (3). An Underpayment shall be deemed to have occurred (i) upon notice to Executive from any governmental taxing authority that Executive's tax liability for any taxable year may be increased by imposition of the Excise Tax on a Compensation Payment with respect to which Kimball has failed to make a sufficient Reimbursement Payment; (ii) upon a determination by a court; (iii) by reason of determination by Kimball (which shall include the position taken by Kimball, together with its consolidated group, on its federal income tax return); or (iv) upon the resolution of a dispute to Executive's satisfaction. If an Underpayment occurs, Executive shall promptly notify Kimball, and Kimball shall pay to Executive promptly, at least five days prior to due date of the requested tax payment, an additional Reimbursement Payment equal to the amount of the Underpayment plus any interest, penalties, additional taxes or similar items imposed on the Underpayment. An Excess Payment shall be deemed to have occurred when Executive has received from the applicable government taxing authority a refund of taxes or other reduction in Executive's tax liability by reason of the Excise Payment and upon either (i) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority that finally and conclusively binds Executive and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has 

expired or (ii) the statute of limitations with respect to Executive's applicable tax return has expired. In that event, Executive shall pay to Kimball the amount of the Excess Payment (together with any interest paid or credited thereon after taxes applicable thereto).

(4) In the event that, according to the Professional Services Firm's determination, an Excise Tax will be imposed on any Compensation Payment, Kimball shall pay to the applicable government taxing authorities, as Excise Tax withholding, the amount of the Excise Tax that Kimball has actually withheld from the Compensation Payments.

(b) Reduction of Payments. If the Compensation Committee of the Board of Directors determines that the sum of all Compensation Payments to Executive and other Kimball employees with respect to a particular Change in Control are reasonably expected to represent, in the aggregate, more than five percent (5%) of the net proceeds received, with respect to that Change in Control, by Kimball and its shareholders, the Compensation Committee, in its sole and absolute discretion, may determine (i) that the Reimbursement Payment otherwise payable to Executive pursuant to subsection (a) shall be reduced by any amount or eliminated entirely or (ii) that no Compensation Payment will be made that would constitute a Parachute Payment.

(1) In either event, Kimball shall give Executive written notice, at least thirty (30) days in advance of the Change in Control, of the Compensation Committee's determination under this subsection (b).

(2) If the Compensation Committee determines that no Compensation Payment shall be made that would constitute a Parachute Payment, Kimball will provide to Executive, within thirty (30) days after Executive's Termination Date, an opinion of the Professional Services Firm that Executive will be considered to have received Parachute Payments if Executive were to receive the full amount of Compensation Payments prescribed by this Agreement or otherwise and setting forth with particularity the smallest amount by which all Compensation Payments would have to be reduced to avoid imposition of the Excise Tax. The Compensation Payments shall be adjusted, in the order of priority designated by Executive in written instructions, to the minimum extent necessary so that none of the Compensation Payments, in the opinion of the Professional Services Firm, would constitute a Parachute Payment. Any determination by the Professional Services Firm under this paragraph (2) shall be binding upon Kimball and Executive.

8. Obligation To Remain an Executive. In the event any other corporation, person or group of persons acting in concert begins a tender or exchange offer, circulates a proxy to shareholders or takes other steps known to Executive to effect a Change in Control, Executive agrees to remain an employee of Kimball and to devote his best efforts to render full-time services to Kimball commensurate with Executive's position, until the earliest of the following: (a) such other corporation, person or group has abandoned or terminated efforts to effect a Change in Control; (b) a Change in Control has occurred; or (c) this Agreement has been terminated.

9. Restrictive Covenants. As a condition of his employment with Kimball, Executive shall comply with the obligations provided in this Section.

(a) Non-Competition During Employment by Kimball. During his employment by Kimball, Executive shall not directly or indirectly have any ownership interest in, work for, advise, or have any business connection or business relationship with any person or entity that competes with or that is planning to compete with Kimball, without the prior written approval of an executive officer of Kimball.

(b) Non-Competition Following Employment Termination. For a period of twelve (12) months after his last day of employment (without regard to the reason for termination) or for the length of his employment, whichever is less (but in no event less than six (6) months), Executive shall not directly or indirectly

(1) Have an ownership interest in any entity or person that competes with Kimball;

(2) Work for, act as an agent or, act in an administrative or financial capacity for, act as a sales or marketing representative for, advise, consult with or manage any entity or person that competes with Kimball; or

(3) Compete with Kimball for customers of Kimball.

For purposes of this Section, the term "compete" or "competes" or "competition" means the actual or planned business activities of an entity or person whereby the entity or person sells, solicits, or markets products or services similar or 

analogous to those which Executive sold, worked on, or provided services on for Kimball during the twelve (12) month period immediately prior to his separation from Kimball. To the extent that, during the 12-month period immediately preceding his last day of employment, Executive was assigned only to one Kimball division or Affiliate, his obligations under this subsection (b) apply only with respect to that division or Affiliate.

(c) Other Non-Competition Provisions. 

(1) Nothing in subsections (a) or (b) prohibits Executive from purchasing, for investment purposes only, any stock or corporate security traded or quoted on a national securities exchange or a national market system, so long as such ownership does not violate Kimball 's ethical business conduct policies. 

(2) The parties expressly agree that the terms of the non-competition provisions in subsections (a) and (b) are reasonable and necessary to protect Kimball 's interests, and are valid and enforceable. In the unlikely event, however, that a court were to determine that any portion of the non-competition provisions in subsections (a) or (b) is unenforceable, then the remainder of the non-competition provisions shall remain valid and enforceable to the maximum extent possible.

(d) Other Limited Prohibitions. During his employment by Kimball and for twelve (12) months post-termination, for any reason, or the length of his employment, whichever is less (but in no event less than six (6) months), Executive shall not:

(1) Request or advise any customer or client of Kimball with whom Executive had personal contact in the course of his employment by Kimball, or any person or entity having business dealings with Kimball with whom Executive had personal contact in the course of his employment by Kimball, to withdraw, curtail, alter, or cease such business with Kimball.

(2) Disclose to any person or entity the identities of any customers, clients, or any persons having business dealings with the division(s)/subsidiary(s) of Kimball to which Executive was assigned at the time of termination from Kimball and for the preceding 12 months.

(3) Directly or indirectly solicit, influence, or attempt to influence any other employee of Kimball to separate from Kimball.

(e) Trade Secrets and Confidential Information. Executive shall not disclose any Trade Secrets and Confidential Information, directly or indirectly, nor use them in any way, either during the term of his employment or at any time thereafter, except as required in the course of his employment with Kimball. All files, records, documents, computer data (including passwords, access codes, electronic and voice mail, etc.), drawings, specifications, equipment, and similar items relating to the business of Kimball, whether prepared by Executive or otherwise coming into his possession, shall remain the exclusive property of Kimball, and shall not be removed from the premises of Kimball except as required in the course of your employment with Kimball. Upon termination of employment, Executive shall return to Kimball any Trade Secrets and Confidential Information in your possession or control, including, without limitation, all lists of customers, samples, price lists, literature, documents, data, computer and financial records and any other property belonging to Kimball or relating to the business of Kimball or in any way referring or relating to any Trade Secrets and Confidential Information.

(f) Conflict of Interest. Executive shall take no action or obtain any direct or indirect interests in or relationships with any organization that might affect the objectivity and independence of his judgment or conduct in carrying out duties and responsibilities to Kimball under this Agreement. Any such actions or interests which may even create the appearance of a conflict of interest shall be promptly brought to the attention of Kimball. 

(g) Notification of Prospective or Subsequent Employers. Executive shall notify any prospective employer of the existence and obligations of this Section, prior to acceptance of employment. Kimball may inform any person or entity subsequently employing Executive, or evidencing an intention to employ Executive, of the nature of the information Kimball asserts to be Trade Secrets and Confidential Information, and may inform that person or entity of the existence and obligations of this Section and provide to that person or entity a copy of this Section of the Agreement.

(h) Inventions and Patents. Executive will promptly, from time to time, fully inform and disclose to Kimball all inventions, designs, improvements, and discoveries which Executive now has or may discover during the term of employment which pertain or relate to the business of Kimball or to any experimental work carried on by Kimball, 

whether conceived by Executive alone or with others and whether or not conceived during regular working hours. All such inventions, designs, improvements, and discoveries shall be the exclusive property of Kimball. Executive shall assist Kimball at Kimball's sole expense, to obtain patents on all such inventions, designs, improvements, and discoveries deemed patentable by Kimball, and shall execute all documents and do all things necessary to obtain patents, vest Kimball with full and exclusive title thereto, and protect the same against infringement by others. Executive shall be entitled to no additional compensation for any and all inventions or designs made during the course of this Agreement. "Exhibit A" to this Agreement is a complete list and brief description of all inventions, patented or unpatented, which Executive made or conceived prior to the date of this Agreement. The inventions described on Exhibit A are excluded from the provisions of this Section.

(i) Return of Property. All documents or other tangible materials (whether originals, copies or abstracts and including, without limitation, financial records, contracts, patents, manufacturing technology, marketing and strategic plans, price lists, quotation guides, outstanding quotations, books, records, manuals, files, sales literature, training materials, calling or business cards, credit cards, customer records, correspondence, computer printout documents, orders, messages, phone and address lists, memoranda, notes, agreements, invoices, and receipts) which in any way relate to Kimball 's business, whether furnished to Executive by Kimball or prepared, compiled, used, or acquired by Executive while employed by Kimball, shall not be copied, lent, or duplicated at any time, nor used in any manner other than in the course of his employment by Kimball and shall be returned to Kimball on request or upon the termination of his employment relationship, whichever occurs first.

(j) Security of Property. All keys, combinations, and access codes to Kimball's premises, facilities, and equipment (including, without limitation, to offices, desks, storage cabinets, safes, data processing systems, and communications equipment), whether furnished to Executive by Kimball or prepared, used, or acquired by Executive while employed by Kimball shall be and remain the exclusive property of Kimball and shall not be copied, lent, or communicated to any other person or entity at any time nor used in any manner other than in the course of his employment by Kimball, except as authorized by Kimball, and shall be returned to Kimball on request or upon termination of his employment relationship, whichever occurs first.

(k) Injunctive Relief. Executive agrees that Kimball will be irreparably harmed and money damages alone are inadequate as a remedy to Kimball for any failure by Executive to abide by the terms of this Agreement. Therefore, Kimball shall be entitled to institute and maintain any appropriate legal proceedings to enforce Executive's obligations under this Section, including an action for specific performance and/or injunctive relief. 

(l) Interpretation of Agreement. It is the intention of Executive and Kimball to make the promises contained in this Agreement reasonable and binding only to the extent that it may be lawfully done under existing applicable laws. In the event any part of this Agreement is determined by a court to be overly broad or otherwise unenforceable, it is the desire of Kimball and Executive that the court shall substitute a reasonable judicially enforceable limitation in place of the unenforceable portion of the Agreement. This Agreement constitutes the entire and exclusive agreement between Executive and Kimball, and it supersedes all prior agreements, whether written or oral, concerning the subject matter of this Agreement.

10. Notices. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered personally, mailed by United States certified mail, return receipt requested, postage prepaid, or sent by prepaid express mail, addressed as follows:

If to Kimball:

Kimball Electronics, Inc.
1205 Kimball Boulevard
Jasper, Indiana 47546
Attn.: Corporate Secretary

If to Executive:

To the address set forth on the last page of this Agreement.

Either party may change the address to which notices are to be sent by written notice to the other party. Notice of change in notice address shall be effective only upon receipt by the other party.

11. Successors; Binding Agreement.

(a) Kimball will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Kimball expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Kimball would be required to perform it if no such succession had taken place. Failure of Kimball to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from Kimball in the same amount and on the same terms as Executive would be entitled under this Agreement if such succession had not occurred, except that for the purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Termination Date.

(b) This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

12. Legal Actions. 

(a) This Agreement shall be governed by the laws of the State of Indiana excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this agreement to the substantive law of another jurisdiction.

(b) Any legal action seeking to enforce the terms of this Agreement, or based on any right arising out of this Agreement must be brought in the appropriate court located in Dubois County, Indiana, or if jurisdiction will so permit, in the Federal District Court for the Southern District of Indiana. Kimball and Executive hereby consent to the jurisdiction over each of them by such courts and waive all objections based on venue or inconvenient forum. 

(c) In the event any legal action is brought to resolve a dispute under or in connection with this Agreement, Kimball shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such action. Kimball shall make those reimbursement payments to Executive within thirty (30) days after receiving Executive's statement for such fees and expenses, along with reasonable supporting documentation. In the event, however, that Kimball is the prevailing party in the action under circumstances that permit the court to award attorney's fees to Kimball pursuant to Indiana Code 34-52-1-1, Executive shall reimburse Kimball for all sums advanced to Executive pursuant to this Section.

13. Miscellaneous. 

(a) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 

(b) No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions at the same or at any subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement have been made by either party which are not set forth expressly in this Agreement.

(c) In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

14. Amendment and Termination. 

(a) This Agreement becomes effective as of the Effective Date and shall continue in effect until the earlier of the following: (i) it is terminated by Kimball as provided in subsection (b) of this Section or (ii) the Executive's Termination Date prior to a Change in Control.

(b) Prior to a Change in Control, this Agreement may be terminated or amended in writing by Kimball at any time, effective upon written notice of the amendment or termination to Executive. No amendment or termination will be effective, however, with respect to a Change in Control that occurs within one year following the date of the amendment or termination.

15. Definitions. The following definitions shall be applicable to and govern the interpretation of this Agreement:

(a) "_____ Stock Plan" means the Kimball Electronics, Inc. _____ Stock Option and Incentive Plan.

(b) "Affiliate" means any entity that is a member, along with Kimball Electronics, Inc., of a controlled group of corporations or a group of other trades or businesses under common control, within the meaning of Code Section 414(b) or (c).

(c) "Award Agreement" means any agreement or other instrument evidencing a grant or award of Options, Stock Appreciation Rights, Restricted Shares, Deferred Share Units, Performance Shares, Performance Units, or any other rights awarded under the ____________________, the __________________, or the ____ Stock Plan.

(d) "Board of Directors" means the Board of Directors of Kimball.

(e) "Cause" means, with respect to termination of Executive's employment by Kimball, one or more of the following occurrences, as determined by the Board of Directors: (i) Executive's willful and continued failure to perform substantially the duties of Executive's position or to follow lawful instructions of a senior executive or the Board of Directors, if such failure continues for a period of five days after Kimball delivers to Executive a written notice identifying such failure; (ii) Executive's conviction of a felony or of another crime that reflects adversely on Kimball; (iii) Executive's engaging in fraudulent or dishonest conduct, gross misconduct that is injurious to Kimball, or any misconduct that involves moral turpitude; or (iv) Executive's material breach of his obligations under this Agreement. For any of the stated occurrences to constitute "Cause" under this Agreement, the Board of Directors must find that the stated act or omission occurred, by a resolution duly adopted by the affirmative vote of at least three-quarters of the entire membership of the Board of Directors, after giving reasonable notice to Executive and an opportunity for Executive, together with Executive's counsel, to be heard before the Board of Directors.

(f) "Change in Control" means the consummation of any of the following that is not an Excluded Transaction: (i) the acquisition, by any one person or more than one person acting as a Group, of Majority Ownership of a Relevant Company through merger, consolidation, or stock transfer; (ii) the acquisition during any 12-month period, by any one person or more than one person acting as a Group, of ownership interests in a Relevant Company possessing 35 percent or more of the total voting power of all ownership interests in the Relevant Company; (iii) the acquisition of ownership during any 12-month period, by any one person or more than one person acting as a Group, of 40 percent or more of the total gross fair market value of the assets of a Relevant Company; or (iv) the replacement of a majority of members of the Board of Directors during any 12-month period, by members whose appointment or election is not endorsed by a majority of the members of the Board of Directors prior to the date of the appointment or election. For purposes of this definition: "Relevant Company" means, with respect to Executive, Kimball Electronics, Inc., any Affiliate that employs Executive; any entity that has Majority Ownership of either Kimball Electronics, Inc. or that Affiliate, or any entity in an uninterrupted chain of Majority Ownership culminating in the ownership of Kimball Electronics, Inc. or that Affiliate; "Excluded Transaction" means any occurrence that does not constitute a change in the ownership or effective control, or in the ownership of a substantial portion of the assets of, a Relevant Entity within the meaning of Code Section 409A(a)(2)(A)(v) and its interpretive regulations; "Majority Ownership" of an entity means ownership interests representing more than fifty percent (50%) of the total fair market value or of the total voting power of all ownership interests in the entity; "Group" has the meaning provided in Code Section 409A and its interpretive regulations with respect to changes in ownership, effective control, and ownership of assets; and an individual who owns a vested option to purchase either stock or another ownership interest is deemed to own that stock or other ownership interest.

(g) "Code" means the Internal Revenue Code of 1986, as amended.

(h) "Compensation Payment" means a payment by Kimball to or for the benefit of Executive in the nature of compensation, whether paid or payable pursuant to this Agreement or otherwise.

(i) "Control Termination Period" means the time period beginning one year before a Change in Control and ending on the earlier of (i) two years following that Change in Control or (ii) Executive's death.

(j) "Customer" means any person or entity who, in the twelve (12) month period immediately preceding Executive's termination from Kimball, purchased or arranged for the purchase or initiated an order for the purchase of Kimball products or services, including, but not limited to, brokers, distributors, and retailers.

(k) "Deferred Compensation" means compensation provided under a nonqualified deferred compensation plan as defined in, and subject to, Code Section 409A.

(l) "Disability" means, with respect to Executive, a physical or mental impairment that would entitle Executive to benefits under Kimball's long-term disability plan.

(m) "Effective Date" means _______________.

(n) "Excise Tax" means the excise tax imposed by Section 4999 of the Code or any interest, penalties, additional tax or similar items are incurred by Executive with respect to such excise tax.

(o) "Good Reason" means, with respect to the termination of employment by Executive, one or more of the following occurrences: (i) a material adverse change in the nature or scope of Executive's responsibilities; (ii) a reduction in Executive's salary rate or target bonus; (iii) a reduction of 5 percent or more in the aggregate benefits provided to Executive and his dependents under Kimball's employee benefit plans; (iv) a significant diminution in Executive's position, authority, duties, or responsibilities; (iv) a relocation of Executive's principal site of employment to a location more than fifty (50) miles from the principal employment site; or (v) failure by Kimball to obtain the assumption agreement from any successor as contemplated in Section 11(a).

(p) "Kimball" means Kimball Electronics, Inc., an Affiliate, and any successor to the business or assets of Kimball Electronics, Inc. that executes and delivers the agreement provided for in Section 11(a) of this Agreement or which otherwise becomes bound by all of the terms and provisions of this Agreement by the operation of law.

(q) "Notice of Termination" means a written notice, from the party initiating Executive's employment termination to the other party, specifying whether the termination is covered by the provisions of Section 4 or Section 5 and the facts and circumstances claimed to provide the basis for termination.

(r) "Parachute Payment" means a "parachute payment" as defined in Code Section 280G(b)(2).

(s) "Professional Services Firm" means a nationally recognized certified public accounting firm or compensation consulting firm mutually selected by Kimball and Executive.

(t) "Shares" means unrestricted shares of Class ____ common stock of Kimball, awarded pursuant to the ____ Stock Plan.

(u) "Termination Date" means (i) the date on which Executive's employment with Kimball is terminated pursuant to Executive's Notice of Termination to Kimball, Kimball's Notice of Termination to Executive, or by reason of Executive's death or Disability; or (ii) the date of a Change in Control, if Executive's employment is terminated within one year before a Change in Control.

(v) "Trade Secrets and Confidential Information" means (i) Kimball's formulas, patterns, designs, compilations, programs, devices, methods, techniques, processes or general know-how, with respect to products utilized in the manufacture, distribution and sale of electronics, office and hospitality furniture, and other manufacturing industries, that derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; (ii) Kimball's valuable information, including information about customers, dealers and suppliers, and their technical problems and needs, purchasing habits, and procedures; and (iii) Kimball's financial records, contracts, patents, manufacturing technology, marketing and strategic plans, and other valuable information.

(w) "Value" means, with respect to Executive and a determination date, the following amounts, computed without regard to any termination of rights that would otherwise occur under the applicable plan because of Executive's cessation of continuous service as of that determination date: (i) for Executive's Options and related Stock Appreciation Rights awarded under the ____________________, the ____________________, and the ____ Stock Plan, the excess, if any, of (A) the market price as of the determination date of all Shares subject to Executive's option awards over (B) the aggregate exercise price for those Shares under those option awards; (ii) for Executive's Restricted Shares awarded under the ____ Stock Plan, the market price of those Shares as of the determination date; (iii) for Executive's Deferred Share Units awarded under the ____ Stock Plan, the product of (A) the number of Executive's Deferred Share Units and (B) the sum of the market value of a Share as of the determination date and all dividends credited on a Share as of that date under the applicable award agreement; (iv) for Executive's Performance Shares 

awarded under the ____ Stock Plan, the market value of the Shares as of the determination date; (v) for Executive's Performance Units awarded under the ____ Stock Plan, the product of (A) Executive's Performance Units and (B) the market value of Share as of the determination date; and (vi) for Executive's benefits under the ____ Profit Sharing Incentive Bonus Plan, the cash value of those benefits. For purposes of this definition, the term "market price" has the same meaning as the term "Market Price" as defined in the ____ Stock Plan.

Kimball, by its duly authorized officers, and Executive have caused to be executed, respectively, this Agreement as of the Effective Date.

	
				
	 
	KIMBALL ELECTRONICS, INC.
	 
	EXECUTIVE

	 
	 
	 
	 

	By:
	 
	 
	 

	 
	[printed name]
	 
	[printed name]

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	[address]Exhibit 10.7  06.30.2014 Stock Option and Incentive Plan

Exhibit 10.7

KIMBALL ELECTRONICS, INC.

2014 STOCK OPTION AND INCENTIVE PLAN

KIMBALL ELECTRONICS, INC.

2014 STOCK OPTION AND INCENTIVE PLAN

TABLE OF CONTENTS

	
			
	 
	Page

	1.
	Plan Purpose
	1

	2.
	Definitions
	1

	3.
	Administration
	3

	4.
	Participants
	4

	5.
	Substitute Options
	4

	6.
	Shares Subject to Plan and Limitations on Grants
	4

	7.
	General Terms and Conditions of Options
	5

	8.
	Exercise of Options
	5

	9.
	Termination of Options
	6

	10.
	Restrictive Covenants
	6

	11.
	Incentive Stock Options
	6

	12.
	Stock Appreciation Rights
	7

	13.
	Terms and Conditions of Unrestricted Shares and Restricted Shares
	8

	14.
	Terms and Conditions of Restricted Share Units
	9

	15.
	Performance Shares and Performance Units
	10

	16.
	Adjustments Upon Changes in Capitalization
	11

	17.
	Effect of Reorganization
	12

	18.
	Assignments and Transfers
	13

	19.
	No Implied Rights
	13

	20.
	Delivery and Registration of Shares
	13

	21.
	Income Tax Withholding
	14

	22.
	Waiver of Restrictions and Requirements
	14

	23.
	Termination, Amendment and Modification of Plan, Award Agreements and Awards
	14

	24.
	Code Section 409A
	14

	25.
	Recoupment of Awards
	15

	26.
	Effective Date and Term of Plan
	15

	27.
	Governing Law
	15

	28.
	Shareholder Rights
	15

KIMBALL ELECTRONICS, INC.
2014 STOCK OPTION AND INCENTIVE PLAN

1.Plan Purpose.  The purpose of the Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan is (i) to align the personal interests of Plan Participants with those of the shareholders of the Company, (ii) to encourage key individuals to accept or continue employment or service with the Company and its subsidiaries, and (iii) to furnish incentive to such key individuals to improve operations and increase profits by providing such key individuals the opportunity to acquire Common Stock of the Company or to receive monetary payments based on the value of such Common Stock.  It is intended that certain Awards granted under the Plan will qualify as performance-based compensation within the meaning of section 162(m) of the Code, to the extent applicable.
2.Definitions.  The following definitions are applicable to the Plan:
“Affiliate” means any “parent corporation” or “subsidiary corporation” of the Company as such terms are defined in Code sections 424(e) and (f), respectively.
“Award” means the grant by the Committee of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Unrestricted Shares, Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, Exchange Rights or any combination thereof, as provided in the Plan.
“Award Agreement” means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, and its interpretive regulations.  
“Committee” means the Committee appointed by the Board pursuant to Section 3 hereof.
“Common Stock” means shares of common stock, no par value per share, of the Company as constituted on the effective date of the Plan, and any other shares into which such Common Stock shall thereafter be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or the like.
“Company” means Kimball Electronics, Inc., an Indiana corporation.
“Continuous Service” means, in the case of an Employee, the absence of any interruption or termination of service as an Employee of the Company or an Affiliate; and in the case of an individual who is not an Employee, the absence of any interruption or termination of the service relationship between the individual and the Company or an Affiliate.  Service will not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the 

Company or in the case of a Participant’s transfer between the Company and an Affiliate or any successor to the Company.
“Director” means any individual who is a member of the Board.
“Disability” means, with respect to a Participant, a physical or mental impairment that would entitle the Participant to benefits under the Company’s long-term disability plan.
“EBITDA” means earnings before interest, taxes, depreciation and amortization.
“Economic Profit” means net income of the Company less the Company’s cost of capital.  Economic Profit shall be calculated under this Plan in the same manner in which it is calculated for purposes of the Company’s Profit Sharing Incentive Bonus Plan.
“Employee” means any person, including an officer, who is employed by the Company or any Affiliate.  
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exercise Price” means the price per Share at which the Shares subject to an Option may be purchased upon exercise of the Option.
“Incentive Stock Option” means an option to purchase Shares granted by the Committee pursuant to the terms of the Plan that is intended to qualify under Code section 422.
“Market Value” means, with respect to any Share of Common Stock, the closing sales price of one Share for the market trading day on the date of the determination (or if no sales of Shares were reported on that date, on the last trading day on which sales of Shares were reported) on The NASDAQ Stock Market LLC (“NASDAQ”), or, if the Shares are not then listed on NASDAQ, on the principal exchange on which the Shares are then listed for trading, or, if no Shares are then listed for trading on any exchange, the mean between the last reported “bid” and “asked” prices of one Share, as reported by an over-the-counter market or by any other customary financial reporting service or system then in use, for the market trading day on the date of determination (or if there were no “bid” or “asked” prices reported on that date, on the last trading day on which “bid” and “asked” prices were reported), or, if no such reported prices are available, the fair market value on such date of one Share as the Committee shall determine consistently with the standards for determining fair market value under Code section 409A and its interpretive regulations.
“Non-Qualified Stock Option” means an option to purchase Shares granted by the Committee pursuant to the terms of the Plan, which option is not intended to qualify under Code section 422.
“Option” means an Incentive Stock Option or a Non-Qualified Stock Option.  “Participant” means any individual selected by the Committee to receive an Award.
“Performance Cycle” means the period of time, designated by the Committee, over which Performance Shares or Performance Units may be earned.

2

“Performance Shares” means Shares awarded pursuant to Section 15 hereof.
“Performance Unit” means an equity-related unit of interest awarded pursuant to Section 15 hereof, other than a Performance Share.
“Plan” means the Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan.
“Reorganization” means the liquidation or dissolution of the Company, or any merger, share exchange, consolidation or combination of the Company (other than a merger, share exchange, consolidation or combination in which the Company is the continuing entity and which does not result in the outstanding Shares being converted into or exchanged for different securities, cash or other property or any combination thereof), or the sale of all or substantially all of the assets of the Company.
“Restricted Period” means the period of time selected by the Committee for the purpose of determining when restrictions are in effect under Section 13 hereof with respect to Restricted Shares.
“Restricted Shares” means Shares that have been contingently awarded to a Participant by the Committee subject to the restrictions referred to in Section 13 hereof, so long as such restrictions are in effect.
“Restricted Share Unit” means an Award, granted to a Participant pursuant to Section 14 hereof, of a right to receive a payment in the future based on the value of Common Stock.
“Retirement” means, with respect to a Participant, termination of Continuous Service, for any reason other than death, after the Participant has attained the minimum retirement age under the governmental retirement system for the applicable country (age 62 in the United States).
“Securities Act” means the Securities Act of 1933, as amended.
“Shares” means the shares of Common Stock.
“Stock Appreciation Rights” means an Award granted to a Participant pursuant to Section 12 hereof.  
“Unrestricted Shares” means Shares awarded to a Participant by the Committee without any restrictions.
3.Administration.  The Plan will be administered by a Committee of the Board, which will consist of three or more members of the Board, each of whom will be an independent director within the meaning of the rules and regulations of NASDAQ, a “non-employee director” as provided under Rule 16b-3 of the Exchange Act, and an “outside director” as provided under Code section 162(m).  The members of the Committee will be appointed by the Board.  Except as limited by the express provisions of the Plan, the Committee will have sole and complete authority and discretion to (a) select Participants and grant Awards; (b) determine the number of Shares to be subject to types of Awards generally, as well as to individual Awards granted under the Plan; (c) determine the terms and conditions upon which Awards will be granted under the Plan; (d) prescribe the form 

3

and terms of Award Agreements; (e) establish procedures and regulations for the administration of the Plan; (f) interpret the Plan; and (g) make all determinations deemed necessary or advisable for the administration of the Plan.
Notwithstanding the foregoing, the Committee may delegate to certain executive officers of the Company selected by the Committee the authority to grant Awards to Employees or consultants of the Company or its Affiliates, subject to specified volume limitations and other conditions determined by the Committee.  The Committee may not delegate authority to grant Awards to any “Officer,” as such term is defined in Rule 16a-1(f) of the Exchange Act.
A majority of the Committee will constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all members of the Committee without a meeting, will be acts of the Committee.  All determinations and decisions made by the Committee pursuant to the provisions of the Plan will be final, conclusive, and binding on all persons, and will be given the maximum deference permitted by law.
4.Participants.  The Committee may select from time to time Participants in the Plan from those Directors, Employees or consultants of the Company or its Affiliates who, in the opinion of the Committee, have the capacity for contributing in a substantial measure to the successful performance of the Company or its Affiliates, and in the case of consultants, are natural persons who provide services to the Company or any Affiliate, other than in connection with a capital raising transaction or promoting or maintaining a market in the Company’s Common Stock.
5.Substitute Options.  In the event the Company or an Affiliate consummates a transaction described in Code section 424(a), persons who become Employees or Directors on account of such transaction may be granted Options in substitution for Options granted by the former employer.  The Committee, in its sole discretion and consistent with Code section 424(a) shall determine the number and Exercise Price of the substitute Options.
6.Shares Subject to Plan and Limitations on Grants.  Subject to adjustment by the operation of Section 16 hereof:
(a)The maximum number of Shares that may be issued with respect to Awards made under the Plan is Five Million (5,000,000) Shares.
(b)The maximum number of Shares that may be issued with respect to Incentive Stock Options under the Plan is Five Million (5,000,000) Shares.
(c)Limits on Awards to Individual Participants.  The maximum number of Shares that may be granted under the Plan to any Participant in any single calendar year under all forms of Awards will not exceed Four Hundred Thousand (400,000) Shares.  No Participant may be granted, in any single calendar year, Options and/or Stock Appreciation Rights to purchase more than Four Hundred Thousand (400,000) Shares of Common Stock.
(d)The Shares with respect to which Awards may be made under the Plan may either be authorized and unissued Shares or issued Shares heretofore or hereafter reacquired and 

4

held as treasury Shares.  Any Award that expires, terminates or is surrendered for cancellation, or with respect to Restricted Shares, which is forfeited (so long as any cash dividends paid on such Shares are also forfeited), may be subject to new Awards under the Plan with respect to the number of Shares as to which an expiration, termination, cancellation or forfeiture has occurred.  Additionally, Shares that are withheld by the Company or delivered by the Participant to the Company in order to satisfy payment of the Exercise Price or any tax withholding obligation and Shares granted pursuant to an Award Agreement which is subsequently settled in cash rather than Shares, may be subject to new Awards under the Plan.
7.General Terms and Conditions of Options.
(a)The Committee will have full and complete authority and discretion, except as expressly limited by the Plan, to grant Options and to prescribe the terms and conditions (which need not be identical among Participants) of the Options.  Each Option will be evidenced by an Award Agreement that will specify: (i) the Exercise Price, (ii) the number of Shares subject to the Option, (iii) the expiration date of the Option, (iv) the manner, time and rate (cumulative or otherwise) of exercise of the Option, (v) the restrictions, if any, to be placed upon the Option or upon Shares that may be issued upon exercise of the Option, (vi) the conditions, if any, under which a Participant may transfer or assign Options, and (vii) any other terms and conditions as the Committee, in its sole discretion, may determine.
(b)The Committee shall not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Option Award Agreement to reduce the Exercise Price.  Furthermore, no Option shall be cancelled and replaced with an Option having a lower Exercise Price without further approval of the shareholders of the Company.  Notwithstanding any other provision under the Plan, the Exercise Price for any Option awarded under the Plan may not be less than the Market Value of the Shares on the date of grant.
8.Exercise of Options.
(a)Except as provided in Section 18 hereof, an Option granted under the Plan will be exercisable only by the Participant, and except as provided in Section 9 hereof or as otherwise set forth in the Award Agreement, no Option may be exercised unless at the time the Participant exercises the Option, the Participant has maintained Continuous Service since the date of the grant of the Option.
(b)To exercise an Option under the Plan, the Participant must give written notice to the Company specifying the number of Shares with respect to which the Participant elects to exercise the Option together with full payment of the Exercise Price.  The date of exercise will be the date on which the notice is received by the Company.  Payment may be made (i) in cash (including check, bank draft, wire transfer or money order), (ii) by tendering Shares already owned by the Participant for at least six (6) months prior to the date of exercise and having a Market Value on the date of exercise equal to part or all of the Exercise Price, (iii) by the delivery of a certificate of ownership in which the Participant certifies ownership of Shares already owned by the Participant for at least six (6) months prior to the date of exercise and having a Market Value on the date of exercise equal to part or all of the Exercise Price (in which case the Company shall withhold the 

5

number of Shares certified from the number delivered pursuant to such exercise), (iv) by payment through a broker under a cashless exercise program implemented by the Company in connection with the Plan, or (v) by any other means determined by the Committee in its sole discretion.
9.Termination of Options.  Unless otherwise specifically provided elsewhere in the Plan or by the Committee in the Award Agreement or any amendment thereto, Options will terminate as provided in this Section.
(a)Unless sooner terminated under the provisions of this Section, Options will expire on the earlier of the date specified in the Award Agreement or the expiration of ten (10) years from the date of grant.
(b)If the Continuous Service of a Participant is terminated by the Company for any reason whatsoever, or is terminated by the Participant for any reason other than death, Disability or Retirement, all rights under any Options granted to the Participant will terminate immediately upon the Participant’s cessation of Continuous Service.
(c)In the event of the Participant’s death or Disability, the Participant or the Participant’s beneficiary, as the case may be, may exercise outstanding Options to the extent that the Participant was entitled to exercise the Options at the date of cessation of Continuous Service, but only within the one-year period immediately succeeding the Participant’s cessation of Continuous Service by reason of death or Disability, and in no event after the applicable expiration date of the Options.
(d)In the event of the Participant’s Retirement, all of the Participant’s outstanding Options shall vest immediately and become exercisable, but only within the two-year period immediately succeeding the date of Retirement, and in no event after the applicable expiration date of the Options.
(e)Notwithstanding the provisions of the foregoing paragraphs of this Section 9, the Committee may, in its sole discretion, establish different terms and conditions pertaining to the effect of the cessation of Continuous Service, to the extent permitted by applicable federal and state law and in no event after the applicable expiration date of the Options.
10.Restrictive Covenants.  In its discretion, the Committee may condition the grant of any Option under the Plan upon the Participant agreeing to reasonable covenants in favor of the Company and/or any Affiliate (including, without limitation, covenants not to compete, not to solicit employees and customers, and not to disclose confidential information) that may have effect following the termination of employment with the Company or any Affiliate, and after the Option has been exercised, including, without limitation, the requirement to disgorge any profit, gain or other benefit received upon exercise of the Option prior to any breach of any covenant.
11.Incentive Stock Options.
(a)Incentive Stock Options may be granted only to Participants who are Employees.  Any provisions of the Plan to the contrary notwithstanding, (i) no Incentive Stock 

6

Option will be granted after the earlier of ten (10) years from the date the Plan, as amended and restated, is approved by the Company’s shareholders or the termination date of the Plan as set forth in Section 26 hereof, (ii) no Incentive Stock Option will be exercisable more than ten (10) years from the date the Incentive Stock Option is granted, (iii) the Exercise Price of any Incentive Stock Option will not be less than the Market Value per Share on the date such Incentive Stock Option is granted, (iv) any Incentive Stock Option will not be transferable by the Participant to whom such Incentive Stock Option is granted other than by will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by such Participant, (v) no Incentive Stock Option will be granted that would permit a Participant to acquire, through the exercise of Incentive Stock Options in any calendar year, under all plans of the Company and its Affiliates, Shares having an aggregate Market Value (determined as of the time any Incentive Stock Option is granted) in excess of $100,000 (determined by assuming that the Participant will exercise each Incentive Stock Option on the date that such Option first becomes exercisable), and (vi) no Incentive Stock Option may be exercised more than three (3) months after the Participant’s cessation of Continuous Service for any reason other than death or Disability.  Notwithstanding the foregoing, in the case of any Participant who, at the date of grant, owns shares possessing more than 10% of the total combined voting power of all classes of capital stock of the Company or any Affiliate, the Exercise Price of any Incentive Stock Option will not be less than 110% of the Market Value per Share on the date such Incentive Stock Option is granted and such Incentive Stock Option shall not be exercisable more than five years from the date such Incentive Stock Option is granted.
(b)Notwithstanding any other provisions of the Plan, if for any reason an Option granted under the Plan that is intended to be an Incentive Stock Option fails to qualify as an Incentive Stock Option, such Option will be deemed to be a Non-Qualified Stock Option, and such Option will be deemed to be fully authorized and validly issued under the Plan.
12.Stock Appreciation Rights.  The Committee may, in its discretion, grant Stock Appreciation Rights in connection with all or any part of an Option granted under the Plan.  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 and as may be set forth in an Award Agreement, including the following:
(a)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.
(b)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:
(i)    the Market Value per Share of the 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
(ii)    the aggregate Exercise Price for such number of Shares.

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(c)Each Stock Appreciation Right will be exercisable at the time, in the manner and to the extent the Option to which it relates is exercisable.
(d)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.
(e)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.
13.Terms and Conditions of Unrestricted Shares and Restricted Shares.  The Committee will have full and complete authority, subject to the limitations of the Plan, to grant Awards of Unrestricted Shares and Restricted Shares and to prescribe the terms and conditions (which need not be identical among Participants) in respect of the Awards.  Unless the Committee otherwise specifically provides in the Award Agreement, an Award of Restricted Shares will be subject to the following provisions:
(a)At the time of an Award of time-based Restricted Shares, the Committee will establish for each Participant a time-based Restricted Period during which, or at the expiration of which, the Restricted Shares will vest if the Participant remains in Continuous Service.  The vesting of Restricted Shares may also be conditioned upon the attainment of specified Performance Goals (as defined in Section 15 hereof) within specified Performance Cycles.  Subject to paragraph (g) of this Section, the Participant will have all the rights of a shareholder with respect to the Restricted Shares, including, but not limited to, the right to receive all dividends paid on the Restricted Shares and the right to vote the Restricted Shares.  The Committee will have the authority, in its discretion, to accelerate the time at which any or all of the time-based restrictions will lapse with respect to any Restricted Shares prior to the expiration of the Restricted Period, or to remove any or all time-based restrictions, whenever it may determine that such action is appropriate by reason of changes in applicable tax or other laws or other changes in circumstances occurring after the commencement of the Restricted Period.
(b)If a Participant ceases Continuous Service for any reason other than death, Disability or Retirement, before the Restricted Shares have vested, a Participant’s rights with respect to the unvested portion of the Restricted Shares will terminate and be returned to the Company.
(c)If a Participant ceases Continuous Service by reason of death, Disability or Retirement before any time-based Restricted Period has expired, the Restricted Shares will become fully vested.
(d)The Committee, in its sole discretion, may establish guidelines providing that if a Participant ceases Continuous Service before the end of a Performance Cycle by reason of death, Disability or Retirement, the Participant will be entitled to a prorated payment, following the close of the applicable Performance Cycle, with respect to any performance-based Restricted Shares that were earned during the Performance Cycle.

8

(e)Each certificate issued in respect to Restricted Shares will be registered in the name of the Participant and deposited by the Participant, together with a stock power endorsed in blank, with the Company and will bear the following (or a similar) legend:
“The transferability of this certificate and the shares represented hereby are subject to the terms and conditions (including forfeiture) contained in the Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan, and an Award Agreement entered into between the registered owner and Kimball Electronics, Inc. Copies of the Plan and Award Agreement are on file in the office of the Secretary of Kimball Electronics, Inc.”
(f)At the time of an Award of Restricted Shares, the Participant will enter into an Award Agreement with the Company in a form specified by the Committee agreeing to the terms and conditions of the Award.
(g)At the time of an Award of Restricted Shares, the Committee may, in its discretion, determine that the payment to the Participant of cash dividends declared or paid on the Restricted Shares by the Company, or a specified portion thereof, will be deferred until the lapsing of the restrictions imposed with respect to the Restricted Shares, and will be held by the Company for the account of the Participant until such time.  In the event of deferral, there will be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum as the Committee, in its discretion, may determine.  Payment of deferred dividends, together with accrued interest, will be made at the end of the applicable Restricted Period as originally established, and any Committee decision, under paragraph (a) of this Section, to accelerate the lapse of time-based restrictions on Restricted Shares will not accelerate the payment of deferred dividends and accrued interest.  In addition, distributions in the form of Common Stock shall be subject to the same restrictions as the underlying Restricted Shares.
(h)At the expiration of the restrictions imposed by this Section, the Company will redeliver to the Participant the certificate(s) and stock powers, deposited with the Company pursuant to paragraph (e) of this Section and the Shares represented by the certificate(s) will be free of all restrictions.
(i)No Award of Restricted Shares may be assigned, transferred or encumbered.
14.Terms and Conditions of Restricted Share Units.  The Committee will have full and complete authority, subject to the limitations of the Plan, to grant Awards of Restricted Share Units and to prescribe the terms and conditions (which need not be identical among Participants) in respect of the Awards, which shall be evidenced by an Award Agreement.  Unless the Committee otherwise specifically provides in the Award Agreement, an Award of Restricted Share Units will be subject to the following provisions:
(a)At the time of an Award of Restricted Share Units, the Committee will establish for each Participant the number of shares of Common Stock subject to the Award and any time-based period or periods at which the Award will be paid.  Payment of the Award may also be 

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conditioned upon the attainment of specified Performance Goals (as defined in Section 15 hereof) within specified Performance Cycles.
(b)If a Participant ceases Continuous Service for any reason other than death, Disability or Retirement before the payment date of any portion of the Restricted Share Units, a Participant’s rights with respect to the unvested portion of the Restricted Share Units will terminate.
(c)Subject to Section 24 hereof, if a Participant ceases Continuous Service by reason of death, Disability or Retirement before the vesting and payment date of any time-based portion of the Restricted Share Units, the time-based Restricted Share Units will become fully vested and payable.
(d)Subject to Section 24 hereof, the Committee, in its sole discretion, may establish guidelines providing that if a Participant ceases Continuous Service before the end of a Performance Cycle by reason of death, Disability or Retirement, the Participant will be entitled to a prorated payment, following the close of the applicable Performance Cycle, with respect to any performance-based Restricted Share Units that were earned during the Performance Cycle.
(e)The Committee shall determine whether payment shall be made in cash, Common Stock, or a combination of the two.  Unless the Committee determines otherwise, payment will be equal to the number of Restricted Share Units payable multiplied by (i) the Market Value of a share of Common Stock at the time of vesting, plus (ii) the sum of all dividends credited on a share of Common Stock during the period commencing on the date of the Restricted Share Unit Award and ending on the date of vesting.
(f)Subject to the terms of Section 22 hereof for any Restricted Share Units intended to qualify as performance-based compensation, the Committee may, in its sole discretion when it finds that such an action would be in the best interests of the Company, waive in whole or in part any or all remaining time-based restrictions with respect to the Restricted Share Units of a Participant who terminates employment before the Restricted Share Units are fully vested.  If the Committee waives any such restrictions, the affected Restricted Share Units will continue to be paid at the time originally established under paragraph (a) of this Section, without acceleration.
(g)Restricted Share Units are not transferable, except that a Participant may designate a beneficiary to receive any amount payable with respect to Restricted Share Units on the Participant’s death.
15.Performance Shares and Performance Units.
(a)The Committee, in its sole discretion, may from time to time authorize the grant of Performance Shares and Performance Units upon the achievement of performance goals (which may be cumulative and/or alternative) within a designated Performance Cycle as may be established, in writing, by the Committee based on any one or any combination of the following business criteria (the “Performance Goals”): (i) Economic Profit; (ii) earnings per share; (iii) return on equity; (iv) return on assets; (v) operating income; (vi) market value per share; (vii) EBITDA; 

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(viii) cash flow; (ix) net income (before or after taxes); (x) revenues; (xi) cost reduction goals; (xii) market share; and (xiii) total return to shareholders.
(b)In the case of Performance Units, the Committee shall determine the value of Performance Units under each Award.
(c)As determined in the discretion of the Committee, Performance Goals may differ among Participants and/ or relate to performance on a Company-wide or divisional basis.
(d)At such time as it is certified, in writing, by the Committee that the Performance Goals established by the Committee have been attained or otherwise satisfied within the Performance Cycle, the Committee will authorize the payment of Performance Shares or Performance Units in the form of cash or Shares registered in the name of the Participant, or a combination of cash and Shares, equal to the value of the Performance Shares or Performance Units at the end of the Performance Cycle.  Payment shall be made in a lump sum within two and one-half months following the close of the applicable Performance Cycle.
(e)The grant of an Award of Performance Shares or Performance Units will be evidenced by an Award Agreement containing the terms and conditions of the Award as determined by the Committee.  To the extent required under Code section 162(m), the business criteria under which Performance Goals are determined by the Committee will be resubmitted to shareholders for reapproval no later than the first shareholder meeting that occurs in the fifth year following the year in which shareholders previously approved the Plan.
(f)If the Participant ceases Continuous Service before the end of a Performance Cycle for any reason other than Disability, death or Retirement, the Participant will forfeit all rights with respect to any Performance Shares or Performance Units that were being earned during the Performance Cycle.  The Committee, in its sole discretion, may establish guidelines providing that if a Participant ceases Continuous Service before the end of a Performance Cycle by reason of Disability, death or Retirement, the Participant will be entitled to a prorated payment, following the close of the applicable Performance Cycle, with respect to any Performance Shares or Performance Units that were earned during the Performance Cycle.
16.Adjustments Upon Changes in Capitalization.  In the event of any change in the outstanding Shares subsequent to the effective date of the Plan by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation or any change in the corporate structure or Shares of the Company, such adjustments will be made in the maximum aggregate number and class of Shares as to which Awards may be granted under the Plan, the individual limits set forth in Section 6(c) hereof, the number and class of Shares subject to outstanding Awards, the Exercise Price, grant price or other price of Shares subject to outstanding Awards, any performance conditions relating to Shares, the Market Value of Shares or per-Share results, and other terms and conditions of outstanding Awards, as may be determined to be proportionate and equitable by the Committee to prevent the dilution or enlargement of Awards and to preserve the availability of Shares (or other securities) for future grants under the Plan; provided, however, that the number of Shares subject to any Award will always be rounded down to a whole number.  The Committee’s determination with respect to any adjustments will be 

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conclusive.  Any Shares or other securities received, as a result of any of the foregoing, by a Participant with respect to Restricted Shares will be subject to the same restrictions and the certificate(s) or other instruments representing or evidencing the Shares or other securities will be legended and deposited with the Company in the manner provided in Section 13 hereof.  To the extent that any adjustment will affect an Award that constitutes deferred compensation subject to Code section 409A, or that would cause an Award to become deferred compensation subject to Code section 409A, the Committee will adjust the Award in a manner that will not constitute the grant of a new stock right or a change in the form of payment under Code section 409A and its interpretive regulations.
17.Effect of Reorganization.  Unless otherwise provided by the Committee in the Award Agreement, Awards will be affected by a Reorganization as follows:
(a)If the Reorganization is a dissolution or liquidation of the Company then (i) the time-based restrictions on Restricted Shares will lapse and (ii) each outstanding Option Award will terminate, but each Participant to whom the Option was granted will have the right, immediately prior to the dissolution or liquidation, to exercise the Option in full, notwithstanding the provisions of Section 11 hereof, and the Company will notify each Participant of such right within a reasonable period of time prior to any dissolution or liquidation.
(b)If the Reorganization is a merger, share exchange, consolidation or combination, upon the effective date of the Reorganization:
(i)     each Participant will be entitled, upon exercise of an Option in accordance with all of the terms and conditions of the Plan, to receive in lieu of Shares, such shares or other securities or consideration as the holders of Shares are entitled to receive pursuant to the terms of the Reorganization (the “Acquisition Consideration”);
(ii)    each Participant will be entitled, upon exercise of a Stock Appreciation Right in accordance with all the terms and conditions of the Plan, to receive the difference between (A) the aggregate fair market value, on the applicable date, of the Acquisition Consideration receivable upon such Reorganization by a holder of the number of Shares which might have been obtained upon exercise of the Option to which the Stock Appreciation Right relates (or any portion thereof) immediately prior to such Reorganization and (B) the aggregate Exercise Price of such Option (or portion thereof);
(iii)    each holder of Performance Shares or Performance Units (with respect to Shares, if any, covered by such Award) will be entitled to receive on the date set forth in such Award, the Acquisition Consideration receivable upon such Reorganization by a holder of the number of Shares which are covered by such Award; and (iv) each holder of Restricted Shares or Restricted Share Units will be entitled to receive such shares or other securities or consideration as the holders of Shares received upon such Reorganization, which, in the case of Restricted Shares will be subject to the restrictions set forth in Section 13 hereof (unless the Committee 

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accelerates the lapse of such restrictions) and the certificate(s) or other instruments representing or evidencing any shares or other securities shall be legended and deposited with the Company in the manner provided in Section 13 hereof.
Despite any other provision of this Section 17 to the contrary, for Awards of Performance Shares, Performance Units, Restricted Shares, or Restricted Share Units that are intended to qualify as performance-based compensation under Code section 162(m), a Reorganization shall not cause accelerated vesting or payment with respect to those Awards unless the Reorganization constitutes a “change of ownership or control” for purposes of Code section 162(m) and its interpretive regulations; and for Awards of Performance Units or Restricted Share Units that constitute “deferred compensation” within the meaning of Code section 409A, a Reorganization shall not cause accelerated payment with respect to those Awards unless the Reorganization constitutes a “change in the ownership or effective control” or a “change in the ownership of a substantial portion of the assets” of the Company, within the meaning of Code section 409A and its interpretive regulations.
The adjustments contained in this Section and the manner of application of such provisions will be determined solely by the Committee.
18.Assignments and Transfers.  No Award nor any right or interest of a Participant in any Award under the Plan may be assigned, encumbered or transferred otherwise than by will or the laws of descent and distribution.  Notwithstanding the foregoing, the Committee may, in its sole discretion, set forth in an Award Agreement at the time of grant or thereafter, that the Award (other than Incentive Stock Options) may be transferred to members of the Participant’s immediate family, to one or more trusts solely for the benefit of such immediate family members and to partnerships in which such family members or trusts are the only partners.  For this purpose, immediate family means the Participant’s spouse, parents, children, step-children, grandchildren and legal dependents.  Any transfer of an Award under this provision will not be effective until notice of such transfer is delivered to the Company.
19.No Implied Rights.  No officer, Director, Employee or other person will have a right to be selected as a Participant nor, having been so selected, to be selected again as a Participant, and no officer, Director, Employee or other person will have any claim or right to be granted an Award under the Plan or under any other incentive or similar plan of the Company or any Affiliate.  Neither the Plan nor any action taken under the Plan will be construed as giving any Employee any right to be retained in the employ of the Company or any Affiliate.
20.Delivery and Registration of Shares.  The Company’s obligation to deliver Shares with respect to an Award will, if the Committee requests, be conditioned upon the receipt of a representation as to the investment intention of the Participant to whom such Shares are to be delivered, in such form as the Committee will determine to be necessary or advisable to comply with the provisions of the Securities Act or any other applicable federal or state securities laws.  It may be provided that any representation requirement will become inoperative upon a registration of the Shares or other action eliminating the necessity of the representation under the Securities Act or other applicable federal or state securities laws.  The Company will not be required to deliver any Shares under the Plan prior to (a) the admission of such Shares to listing on any stock exchange or quotation system on which Shares may then be listed or quoted, and (b) the completion of any 

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registration or other qualification of the Shares under any state or federal law, rule or regulation, as the Company determines to be necessary or advisable.
21.Income Tax Withholding.  In order to comply with all applicable federal, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or local payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant.  In order to assist a Participant in paying all federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Market Value equal to the amount of such taxes (but only to the extent of the minimum amount required to be withheld under applicable laws or regulations) or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Market Value equal to the amount of such taxes (but only to the extent of the minimum amount required to be withheld under applicable laws or regulations).  The election, if any, must be made on or before the date that the amount of tax to be withheld is determined.
22.Waiver of Restrictions and Requirements.  Notwithstanding any other provision of the Plan, the Committee may permit the lapse or waiver of restrictions with respect to Restricted Share Units or Restricted Shares or the satisfaction of any requirements or goals with respect to Performance Units or Performance Shares.  With respect, however, to Restricted Share Units, Restricted Shares, Performance Units, or Performance Shares that are intended to qualify as performance-based compensation under Code section 162(m), the Committee may not take any action under this Section that will cause those Restricted Share Units, Restricted Shares, Performance Units, or Performance Shares to fail to qualify as performance-based compensation.
23.Termination, Amendment and Modification of Plan, Award Agreements and Awards.  The Board may at any time terminate, and may at any time and from time to time and in any respect amend or modify the Plan, any Award Agreement or any outstanding Awards; provided, however, that to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act, Code section 162(m), or Code section 422 (or any other applicable law or regulation, including requirements of any stock exchange or quotation system on which the Company’s common stock is listed or quoted), shareholder approval of any Plan amendment will be obtained in the manner and to the degree as is required by the applicable law or regulation; and provided further, that no such termination, amendment or modification of the Plan, an Award Agreement or an outstanding Award will in any manner adversely affect the Participant without the consent of the Participant to whom the Award was granted or the transferee of the Award.
24.Code Section 409A.  The Plan and all Awards will be interpreted and applied in a manner consistent with the applicable standards for nonqualified deferred compensation plans established by Code section 409A and its interpretive regulations and other regulatory guidance.  To the extent that any terms of the Plan or an Award would subject a Participant to gross income 

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inclusion, interest, or additional tax pursuant to Code section 409A, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy or to be exempt from, the Code section 409A standards.  A Participant shall not be entitled to payment of a benefit that constitutes “deferred compensation,” within the meaning of Code section 409A, because of the termination of Continuous Service for a reason other than death or Disability, unless that termination constitutes a “separation from service” within the meaning of Code section 409A and its interpretive regulations.  If as of the date his or her employment terminates, an Employee is a “specified employee,” within the meaning of Code section 409A, and if the Company has stock that is publicly traded on an established securities market or otherwise, any payment of deferred compensation, within the meaning of Code section 409A, otherwise payable because of employment termination will be suspended until, and will be paid to the Employee on, the first day of the seventh month following the month in which the Employee’s last day of employment occurs.
25.Recoupment of Awards.  Awards and any compensation or benefits associated therewith shall be subject to repayment or forfeiture as may be required to comply with (a) any applicable listing standards of a national securities exchange adopted in accordance with Section 10D of the Exchange Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder and (b) any policies adopted by the Company to implement such requirements, all to the extent determined by the Committee in its discretion to be applicable to a Participant.  Any Award Agreement may be unilaterally amended by the Committee to comply with any such compensation recovery policy.
26.Effective Date and Term of Plan.  The Plan, as amended and restated, was approved by the Company’s Board of Directors on _______________, 2014, and will become effective on _______________, 2014.  Unless sooner terminated pursuant to Section 23 hereof, no further Awards may be made under the Plan after _______________, 20____.  All Awards granted by the Company under the Plan prior to such termination date shall remain outstanding and shall continue to be subject to the terms of the applicable Award Agreements and the terms and conditions of the Plan as in effect prior to such termination date.
27.Governing Law.  The Plan and Award Agreements will be construed in accordance with and governed by the internal laws of the State of Indiana.
28.Shareholder Rights.  Except to the extent provided with respect to an Award of Restricted Shares in accordance with Section 13 hereof, no Participant shall have any of the rights or privileges of a shareholder of the Company with respect to any Shares issuable pursuant to an Award unless and until certificates representing the Shares shall have been issued and delivered to the Participant.

Adopted by the Board of Directors of Kimball Electronics, Inc. as of _______________, 2014

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