SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
........................................................
FRANKLIN ELECTRIC CO., INC.
(Name of Registrant as Specified In Its Charter)
........................................................
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
...........................................................
2) Aggregate number of securities to which transaction applies:
...........................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
...........................................................
4) Proposed maximum aggregate value of transaction:
...........................................................
5) Total fee paid:
...........................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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FRANKLIN ELECTRIC
400 East Spring Street
Bluffton, Indiana 46714
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
April 12, 1996 at 10:00 A.M., E.S.T.
To the Holders of Shares of Common Stock of
Franklin Electric Co., Inc.
THE ANNUAL MEETING OF SHAREHOLDERS (THE "ANNUAL MEETING") OF
FRANKLIN ELECTRIC CO., INC. (THE "COMPANY"), AN INDIANA CORPORATION,
WILL BE HELD AT THE PRINCIPAL OFFICE OF THE COMPANY, 400 EAST SPRING
STREET, BLUFFTON, INDIANA ON APRIL 12, 1996 AT 10:00 A.M., E.S.T. ,
FOR THE FOLLOWING PURPOSES:
1. To elect three directors for terms expiring at the 1999 Annual
Meeting of Shareholders;
2. To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the 1996 fiscal year;
3. To approve the 1996 Employee Stock Option Plan;
4. To approve the 1996 Nonemployee Director Stock Option Plan; and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on February
23, 1996 will be entitled to vote at the Annual Meeting.
You are urged to sign and return the enclosed proxy in the
envelope provided, whether or not you plan to attend the Annual
Meeting. If you do attend, you may nevertheless vote in person, or
if any time before the proxy is voted you desire to revoke the proxy,
you may do so by delivering to the Secretary of the Company written
notice of such revocation or by executing and delivering a
subsequently dated proxy.
By order of the Board of Directors.
Dean W. Pfister, Secretary
Bluffton, Indiana
March 8, 1996
FRANKLIN ELECTRIC CO., INC.
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
______________________________
PROXY STATEMENT
______________________________
ANNUAL MEETING OF SHAREHOLDERS
APRIL 12, 1996
GENERAL INFORMATION
This Proxy Statement (the "Proxy Statement") and the enclosed
proxy are furnished to shareholders in connection with the
solicitation of proxies by the Board of Directors of Franklin
Electric Co., Inc. (the "Company"), 400 East Spring Street, Bluffton,
Indiana, for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held on April 12, 1996 and at any meeting resulting
from an adjournment or postponement thereof. This Proxy Statement
will be first mailed to shareholders on or about March 8, 1996. The
Company's Annual Report to shareholders, including financial
statements contained therein, is being mailed to shareholders
together with this Proxy Statement. Neither the Annual Report nor
the financial statements contained therein are to be considered part
of this soliciting material.
Shareholders are asked to sign and return the enclosed proxy,
whether or not they plan to attend the Annual Meeting. If the
enclosed proxy is properly signed and returned, the shares
represented thereby will be voted in the manner specified in the
proxy. If the shareholder does not specify the manner in which the
proxy shall be voted, it will be voted FOR the election of the
nominees for director as set forth in this Proxy Statement, FOR the
ratification of the appointment of Deloitte & Touche LLP as
independent auditors, FOR the approval of the 1996 Employee Stock
Option Plan, FOR the 1996 Nonemployee Director Stock Option Plan, and
in accordance with the recommendations of management with respect to
other matters that may properly come before the Annual Meeting. A
shareholder who has executed a proxy has the power to revoke it at
any time before it is voted, by delivering written notice of such
revocation to Mr. Dean W. Pfister, Secretary, 400 East Spring Street,
Bluffton, Indiana 46714, by executing and delivering a subsequently
dated proxy, or by attending the Annual Meeting and voting in person.
The expenses of solicitation, including the cost of printing and
mailing, will be paid by the Company. Officers and employees of the
Company, without additional compensation, may request the return of
the proxies personally, by telephone or by telegram. Arrangements
will also be made with brokerage firms and other custodians, nominees
and fiduciaries to forward proxy solicitation material to the
beneficial owners of shares held of record by such persons, and the
Company will reimburse such entities for reasonable out-of-pocket
expenses incurred by them in connection therewith.
SHAREHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
The Board of Directors of the Company fixed the close of
business on February 23, 1996 as the record date ("Record Date") for
determining shareholders entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, there were 10,000,000 shares
of common stock, $.10 par value (the "Common Stock"), authorized, of
which 6,288,999 shares were outstanding. Each share of Common Stock
is entitled to one vote on each matter submitted to a vote of the
shareholders of the Company. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by the inspectors of election
appointed for the Annual Meeting and will be counted as present for
purposes of determining whether a quorum is present. A majority of
the outstanding shares of Common Stock, present in person or
represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The inspectors will treat
abstentions as shares that are present and entitled to vote for
purposes of determining a quorum, but as unvoted for purposes of
determining the approval of a matter submitted to the shareholders
for a vote. If a broker indicates on a proxy that it does not have
discretionary authority as to certain shares to vote on a particular
matter, those shares will not be voted and will be disregarded for
purposes of determining the approval of a matter.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the persons known by the Company to be
the beneficial owners of more than 5 percent of the Company's Common
Stock as of February 1, 1996. The nature of beneficial ownership is
sole voting and investment power, unless otherwise noted.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Diane D. Humphrey 646,021 10.27
2434 N. Fairway Lane
Bluffton, IN 46714
Patricia Schaefer 653,021 (1) 10.37
405 S. Tara Lane
Muncie, IN 47304
Fort Wayne National Bank 627,902 (2) 9.98
110 W. Berry Street
Fort Wayne, IN 46801
NBD Bancorp, Inc. 500,754 (3) 7.96
611 Woodward Avenue
Detroit, MI 48226
Ruane, Cunniff & Co., Inc. 436,046 (4) 6.93
1370 Avenue of the Americas
New York, NY 10019
Marvin C. Schwartz 507,160 (5) 8.06
c/o Neuberger & Berman
605 Third Avenue
New York, NY 10158
Neuberger & Berman 336,252 (6) 5.35
605 Third Avenue
New York, NY 10158
(1) Includes 7,000 shares issuable pursuant to stock options
exercisable within 60 days.
(2) Fort Wayne National Bank holds these shares as Trustee under the
Company's Employee Stock Ownership Plan ("ESOP") and Directed
Investment Salary Plan ("401(k) Plan"). The 176,459 shares held
in the ESOP will be voted pursuant to the direction of the
participants to the extent these shares are allocated to
participants' accounts. Unallocated shares and shares for which
no direction is received from participants will be voted by the
Trustee in accordance with the direction of the Employee
Benefits Committee of the Company. In the absence of any
direction from the Employee Benefits Committee, such shares will
be voted by the Trustee in the same proportion that the
allocated shares were voted, unless inconsistent with the
Trustee's fiduciary obligations. The 451,443 shares held by the
401(k) Plan will be voted in accordance with the direction of
the Employee Benefits Committee and, in the absence of any such
direction, in the discretion of the Trustee. The Trustee does
not have investment power over any of the shares held by the
ESOP or the 401(k) Plan.
(3) According to a Schedule 13G filed with the Securities and
Exchange Commission ("SEC") on February 9, 1995, NBD Bancorp,
Inc. has sole voting power with respect to 2,239 shares; shared
voting power with respect to 498,515 shares; sole investment
power with respect to 1,879 shares; shared investment power with
respect to 360 shares and no investment power with respect to
498,515 shares.
(4) According to a Schedule 13G filed with the SEC on February 7,
1996, Ruane Cunniff & Co., Inc. has sole investment power with
respect to all of the shares shown and has sole voting power
with respect to 164,775 of those shares.
(5) According to a Schedule 13D filed with the SEC on January 13,
1994, Marvin Schwartz has sole investment and sole voting power
with respect to 422,570 shares and shared investment power and
no voting power with respect to 84,590 shares.
(6) According to a Schedule 13D filed with the SEC on February 12,
1996, Neuberger & Berman has shared investment power with
respect to all of the shares shown and has sole voting power
with respect to 80,814 of those shares.
The following table shows the number of shares of Common Stock
beneficially owned by directors, nominees, each of the executive
officers named in the "Summary Compensation Table" below, and all
executive officers and directors as a group, as of February 1, 1996.
The nature of beneficial ownership is sole voting and investment
power, unless otherwise noted.
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
William J. Foreman 38,347 (1) *
William W. Keefer 20,424 (1) *
William H. Lawson 263,880 (1) 4.06
John B. Lindsay 208,614 (1) 3.29
Robert H. Little 9,042 (1) *
Kirk M. Nevins 25,801 (1) *
Patricia Schaefer 653,021 (1) 10.37
Donald J. Schneider 31,610 (1) *
Gerard E. Veneman 9,548 (1) *
Juris Vikmanis 8,000 (1) *
Howard B. Witt 1,200 (1) *
All directors and 1,269,487 (1) 19.19
executive officers as
a group (12 persons)
* Less than 1 percent of class
(1) Includes shares issuable pursuant to stock options exercisable
within 60 days as follows: Mr. Foreman, 26,880 shares; Mr.
Keefer, 5,000 shares; Mr. Lawson, 210,572 shares; Mr. Lindsay,
47,000 shares; Mr. Little, 7,000 shares; Mr. Nevins, 8,000
shares; Ms. Schaefer, 7,000 shares; Mr. Schneider, 6,000 shares;
Mr. Veneman, 4,000 shares; Mr. Vikmanis, 3,000 shares; Mr. Witt,
1,000 shares; and all directors and executive officers as a
group, 325,452 shares.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors, officers and greater than 10 percent
shareholders of a registered class of the Company's equity securities
to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock of the Company. Directors,
officers and greater than 10 percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on a review of the copies of these
reports furnished to the Company and representations that no other
reports were required to be filed, the Company believes that during
the past fiscal year its directors, officers and greater than 10
percent shareholders complied with all applicable Section 16(a)
filing requirements applicable to them during 1995, except that
Messrs. William J. Foreman and Kirk M. Nevins inadvertently filed
late Form 3 filings in December to report their election as officers
of the Company.
ELECTION OF DIRECTORS
The Company's Board of Directors consists of eight directors
divided into three classes of two or three directors each. Each
year, the directors of one of the three classes are to be elected to
serve terms of three years and until their successors have been
elected and qualified. Three directors are to be elected at the
Annual Meeting this year. The election of a director requires the
affirmative vote of a majority of the shares voted.
Juris Vikmanis, Howard B. Witt and John B. Lindsay have been
nominated to serve as directors of the Company. Mr. Vikmanis and Mr.
Witt are currently directors of the Company. Mr. Lindsay, President
of the Company, has been nominated as a director to replace William
W. Keefer who will be retiring from the Board effective April 12,
1996 in accordance with the Company's By-Laws. Each nominee has
indicated his willingness to serve as a director if elected. If,
however, any nominee is unwilling or unable to serve as a director,
it is the intention of management to nominate such other person as a
director as it may in its discretion determine, in which event the
shares represented by the proxies will be voted for such other
person.
INFORMATION CONCERNING NOMINEES AND DIRECTORS
The ages, principal occupations during the past five years and
certain other affiliations of the director nominees and the
continuing directors, and the years in which they first became
directors of the Company, are as follows:
NOMINEES FOR TERMS EXPIRING IN 1999
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
John B. Lindsay, 53 President of the Company -
President since October 1995. Executive
Vice President of the
Company from 1993 to
1995. Vice President
from 1986 to April 1993.
Director of Old First
National Bank.
Juris Vikmanis, 58 Retired; Vice President, 1988
Director of the Company Aerospace Operations, Amphenol
Corporation from 1992 to 1993,
an aerospace company; formerly
Corporate Senior Vice President,
Square D Company until the sale
of that company in 1991; prior
thereto, Executive Vice
President, Square D Company from
1989 to 1990.
Howard B. Witt, 55 Chairman of the Board Appointed
Director of the Company since 1993, President and to the
Chief Executive Officer Board by
since 1990, Littelfuse, the
Inc.; a manufacturer of Directors
electronic, electrical and in 1994
automotive fuses.
Continuing Directors
- --------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1997
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
Robert H. Little, 60 President, Waddle Manufacturing 1987
Director of the Company Inc., a producer of precision
metal fabrications for the
electronics and medical device
industries.
Patricia Schaefer, 65 Retired; Director of the 1982
Director of the Company Muncie Public Library;
Muncie, Indiana.
Gerard E. Veneman, 75 Retired; President, Nekoosa 1969
Director of the Company Papers Inc. and Executive
Vice President, Great Northern
Nekoosa Corp. from 1970 to 1985,
producers of paper and paper
products. Director, Sentry
Insurance a Mutual Company,
and WCN Bank Corp.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
William H. Lawson, 59 Chairman of the Board and 1985
Chairman of the Board, Chief Executive Officer of the
and Chief Executive Company. Director of Skyline
Officer Corporation, Sentry Insurance
a Mutual Company and American
Electronic Components Inc.
Donald J. Schneider, 60 President of Schneider National 1988
Director of the Company Inc., an asset based logistics
company. Director of Green Bay
Packers and St. Norbert College.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Directors who are not employees of the Company were paid an
annual director's fee of $20,000 plus a fee of $750 for each regular
Board or Board committee meeting attended. Each committee chairman
was paid an additional annual fee of $1,500. Directors who are
employees of the Company receive no additional compensation for
serving on the Board or Board committees.
Nonemployee directors participate in the 1990 Nonemployee
Director Stock Option Plan (the "1990 Director Plan"). The 1990
Director Plan made available 60,000 shares of Common Stock for
issuance pursuant to the exercise of nonqualified stock options. In
approximately one year, all of the available options under this Plan
will have been granted. The 1990 Director Plan will be succeeded by
the 1996 Nonemployee Director Stock Option Plan (the "1996 Director
Plan") if that plan is approved by shareholders at the 1996 Annual
Meeting. The 1996 Director Plan will make available 90,000 shares of
common stock for issuance pursuant to the exercise of nonqualified
stock options. Each nonemployee director who is elected or re-
elected during the term of the 1990 Director Plan or the 1996
Director Plan to serve on the Board of Directors will automatically
be granted an option to purchase 3,000 shares. On April 13, 1995,
Donald J. Schneider received an option to purchase 3,000 shares at an
exercise price of $31.25 per share under the 1990 Director Plan.
The Company has a Consulting Directors' Plan (the "Plan"), for
nonemployee directors who retire from Board service at age 65 or
older. Under the Plan, a retiring director may enter into a
consulting agreement with the Company under the terms of which the
consulting director agrees to be available for consultation from time
to time and is entitled to receive an annual fee for such services
equal to the director's fee in effect at retirement, for the same
number of years he served as director (or until his death, if
sooner). Currently Mentor Kraus and Dr. N. A. Lamberti, who retired
in 1985 and 1988 with 29 and 19 years of service, respectively,
participate in this Plan. Messrs. Kraus and Lamberti each received
an annual fee of $15,000 in 1995. Upon retirement in April 1996, Mr.
Keefer will be eligible to participate in this Plan.
The Board held five (5) regularly scheduled meetings during 1995
and no special meetings. Each director attended 75 percent or more
of the aggregate meetings of the Board and Board committees of which
he or she was a member.
The committees of the Board are: the Audit Committee and the
Personnel and Compensation Committee.
AUDIT COMMITTEE. Members of the Audit Committee currently are
Robert H. Little (Chairman), William W. Keefer, Patricia Schaefer and
Juris Vikmanis. William W. Keefer will retire from the Board
effective April 12, 1996. It is the responsibility of the Audit
Committee to advise and make recommendations to the Board of
Directors in all matters regarding the Company's accounting methods
and internal control procedures. Specific duties of the Audit
Committee include: (i) the review of the scope of the annual audit
by the Company's independent public accountants and the procedures to
be employed and estimated compensation to be paid therefor, (ii) the
review of the audit results and financial statements with the
independent public accountants and the chief financial officer of the
Company, (iii) the review of changes in accounting policies having a
significant effect on the Company's reports, (iv) the preparation and
presentation to the Board of a report summarizing recommendations
with respect to retention or discharge of the independent public
accountants, (v) the review of letters of recommendation from the
independent public accountants and determining that management has
adequately considered or implemented, or both, such recommendations,
(vi) meeting periodically with the Company's financial staff to
assure that the internal auditing staff is able to express its
concerns, either directly to the Audit Committee or through the
independent public accountants, and to review the scope of the
internal accounting and auditing procedures, (vii) the review of the
results and administration of the Company's defined benefit and
defined contribution plans, (viii) the review of the Company's
policies on improper payments and conflicts of interest, and (ix) the
review of officer expense reimbursements. The Audit Committee held
two (2) meetings in 1995.
PERSONNEL AND COMPENSATION COMMITTEE. Members of the Personnel
and Compensation Committee (the "Compensation Committee") currently
are Gerard E. Veneman (Chairman), William H. Lawson, Donald J.
Schneider and Howard B. Witt. The Compensation Committee determines
and approves the annual salary, bonus and other benefits of the chief
executive officer and the other executive officers and directors of
the Company; reviews and submits to the Board of Directors
recommendations concerning stock plans; and periodically reviews the
Company's policies in the area of management benefits. The
Compensation Committee also oversees the Company's management
development and organization structure. The Compensation Committee
also initiates nominations of directors, submitting recommendations
to the Board for approval. Nominations for the election of directors
may also be made by any shareholder entitled to vote in the election
of directors, provided that written notice of intent to make a
nomination is given to the Secretary of the Company not later than
ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of shareholders. Such notice shall set
forth: (i) information regarding the proposed nominee as would be
required to be included in a proxy statement filed pursuant to the
proxy rules of the SEC, and (ii) the consent of such nominee to serve
as a director of the Corporation if so elected. The Personnel and
Compensation Committee held five (5) meetings in 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William H. Lawson, the Chief Executive Officer of the Company,
is a member of the Compensation Committee. Mr. Lawson does not
participate in the determination of his compensation or benefits.
COMPENSATION COMMITTEE REPORT
It is the philosophy of the Compensation Committee to maintain a
compensation program to attract and retain executive officers who can
successfully build the Company's long-term strategic capability. The
Compensation Committee has retained a compensation consulting firm to
provide information on compensation packages of firms of similar size
and industries to aid in the design of its package for the Company's
executive officers. The Committee encourages superior performance
through the use of annual performance targets for the purpose of
determining cash bonuses as well as stock incentive vehicles designed
to closely align the executive's reward to that of the shareholders.
For the Chief Executive Officer, the current compensation
package includes a base salary, an annual incentive cash bonus and
stock options. The Compensation Committee believes the combined
value of base salary plus bonus approximates market value of base
salary and bonus provided to similarly situated executives as
reflected in published market surveys. The Compensation Committee
believes, however, that a significant portion of executive officer
compensation should be dependent upon corporate performance.
Accordingly, base salaries have been established somewhat below
market levels, while a greater than average variable incentive cash
bonus may be achieved.
The Compensation Committee has set a benchmark to determine the
level, if any, of the annual incentive cash bonus to be paid. The
benchmark used is pre-tax return on assets. Considering this ratio
and other qualitative measures, a bonus percentage of base salary is
determined. The Committee awarded the Chief Executive Officer an
incentive cash bonus of 26 percent of base salary for 1995.
As an additional incentive, the Committee makes grants and
awards under the Company's shareholder-approved stock option and
restricted stock plans as well as offering officers the opportunity
to purchase shares under the shareholder-approved stock purchase
plan. The purpose of these plans is to encourage elective stock
ownership, offer long-term performance incentive and to more closely
align the executive's compensation with the return received by the
Company's shareholders. Using information, observations and
recommendations on incentive compensation programs provided by an
outside consultant, the Committee reviews annually the financial
incentives to officers under prior grants and awards and determines
whether additional grants or awards are appropriate. In 1995, the
Committee made a stock option grant of 100,000 shares to the Chief
Executive Officer as a part of his compensation package.
The annual compensation of the other executive officers includes
a base salary and incentive bonus, determined similarly to that
described above for the Chief Executive Officer.
The Committee is currently studying the possible future
application of the limitations on the deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code.
Section 162(m) did not affect compensation paid to any executive
officer in 1995.
G. E. Veneman
W. H. Lawson
D. J. Schneider
H. B. Witt
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder
return on an investment in (1) the Company's Common Stock (including
reinvestment of dividends in 1993, 1994 and 1995 when the Company
paid a dividend on its shares), (2) the Standard & Poor's 500 Stock
Index (including reinvestment of dividends) and (3) the NASDAQ Non-
Financial Stock Index (including reinvestment of dividends) for the
period January 1, 1991 through December 31, 1995. In each case, the
graph assumes the investment of $100 on January 1, 1991.
DOLLARS
500
400
386<F1> 373<F1>
366<F1>
300
259<F1> 268<F2>
213<F3>
200 203<F2>
195<F1> 195<F2>
161<F2> 176<F2> 154<F3> 156<F3>
130<F3> 140<F3>
100
0
1990 1991 1992 1993 1994 1995
YEAR
<F1> FRANKLIN ELECTRIC
<F2> NASDAQ NON FINANCIAL
<F3> S & P 500
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the
years 1993 through 1995 for the Company's Chief Executive Officer and
the Company's three other executive officers who received
compensation in excess of $100,000 during 1995.
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------------
- -
Awards
------
Securities
Underlying
Name and Annual Compensation Options
All Other
-------------------
Principal Position Year Salary Bonus (# of shares)
Compensation<F1>
- ------------------ ---- ------ ----- ------------- ---
- -------------
<S> <C> <C> <C> <C>
<C>
William H. Lawson, 1995 $383,000 $100,000 100,000
$28,501
Chairman of the 1994 300,000 210,000 80,000
14,465
Board and Chief 1993 300,000 210,000
13,209
Executive Officer
John B. Lindsay, 1995 $208,000 $ 85,000
$5,250
President 1994 160,000 112,000 50,000
5,250
1993 151,180 105,826
5,676
Kirk M. Nevins, 1995 $117,000 $ 50,000
$5,250
Vice President- 1994
Sales<F2> 1993
William J. Foreman, 1995 $111,500 $ 75,000
$5,250
Vice President<F2> 1994
1993
<FN>
<F1> All Other Compensation reflects Company matching contributions
to defined contribution plans for each executive officer, except
that the amounts shown for Mr. Lawson also include premiums
incurred by the Company in connection with executive split-
dollar insurance arrangements that restore Mr. Lawson's benefits
to the level in effect when he was first employed by the Company
adjusted for benefit increases, if any, awarded to all covered
employees and reimbursement of taxes paid in connection with the
Company's Pension Restoration Plan. The matching contributions
and split-dollar insurance premium payments for Mr. Lawson were
as follows: $5,250 and $9,215 in 1995; $5,250 and $9,215 in
1994; $5,676 and $7,533 in 1993. In addition, Mr. Lawson was
reimbursed for $14,036 of taxes paid in 1995.
<F2> Mr. Nevins and Mr. Foreman were elected executive officers of
the Company in July, 1995.
Messrs. Lindsay, Nevins and Foreman received an award in 1994 of
20,000, 5,000, and 7,000 shares, respectively under the 1988
Stock Incentive Award Plan with a December 30, 1995 market value
of $660,000, $165,000 and $231,000, respectively.
</FN>
</TABLE>
<TABLE>
OPTION GRANTS IN 1995 FISCAL YEAR
<CAPTION>
Percent
of
Total
Options
Potential
Number of Granted
Realizable Value
Securities to Exercise at Assumed
Annual
Underlying Employees or Rates of
Stock Price
Options in Base
Appreciation for
Granted Fiscal Price Expiration Option
Term<F2>
------------
- ---------
Name (#)<F1> Year ($/Sh) Date 5% ($)
10% ($)
- ---- ------- ---- ------ ------- ---------
- ---------
<S> <C> <C> <C> <C> <C>
<C>
William H. Lawson 100,000 54 31.00 7/14/05 1,949,573
4,940,602
<FN>
<F1> Options were granted on July 14, 1995. All options become
exercisable in the
sixth year following the grant date and may be exercised earlier
upon
achievement of specified levels of return on total assets as
outlined in the
option agreement. Those granted under the 1986 Plan and those
granted
subject to shareholder approval under the 1996 Plan were 40,000
and 60,000,
respectively.
<F2> Amounts represent hypothetical gains that could be achieved
based upon
assumed annual compound stock appreciation rates of 5 percent
and 10 percent
over the original full (10-year) term of the options. The 5
percent and 10
percent rates of stock appreciation are mandated by SEC rules
and do not
represent the Company's estimate of the future market price of
its Common
Stock.
</FN>
</TABLE>
<TABLE>
1995 OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of
Securities
Value of
Underlying
Unexercised
Shares Unexercised
In-the-Money
Acquired Value Options at
Options at
on Realized FY-End (#)
FY-End ($)
Exercise <F1> Exercisable/
Exercisable/
Name (#) ($) Unexercisable
Unexercisable<F2>
- ---- -------- -------- ------------- ----
- -------------
<S> <C> <C> <C> <C>
William H. Lawson 29,597 832,327 210,572/148,000
4,863,376/512,000
John B. Lindsay 47,000/ 30,000
794,875/195,000
Kirk M. Nevins 8,000/ 6,000
123,500/ 39,000
William J. Foreman 26,880/ 12,000
549,789/ 78,000
<FN>
<F1> Based on the excess of the fair market value of the Common Stock
over the option price on the date of exercise.
<F2> Based on fair market value of the Common Stock of $33 on
December 30, 1995.
</FN>
</TABLE>
COMPENSATION PURSUANT TO PLANS
PENSIONS
The Company has three pension plans in which executive officers
participate: the Franklin Electric Co., Inc. Basic Retirement Plan,
the Franklin Electric Co., Inc. Contributory Retirement Plan, and the
Franklin Electric Co., Inc. Pension Restoration Plan (collectively
referred to herein as the "Pension Plans"). The Company also
maintains a fourth pension plan covering employees of a subsidiary;
no executive officers participate in this plan.
The following table illustrates the approximate combined monthly
pension benefit payable upon retirement at age 65 under the Pension
Plans, after integration with social security. In the table, Annual
Compensation is based on the highest thirty-six consecutive months'
compensation which includes salary and bonus.
COMBINED ANNUAL PENSION AMOUNT, INCLUDING SOCIAL SECURITY
ANNUAL
COMPEN- YEARS OF SERVICE
SATION 10 15 20 25 30
35
$150,000 $ 52,500 $ 60,000 $ 67,500 $ 75,000 $ 76,300 $
86,600
200,000 70,000 80,000 90,000 100,000 100,000
108,500
250,000 87,500 100,000 112,500 125,000 125,000
130,400
300,000 105,000 120,000 135,000 150,000 150,000
152,300
350,000 122,500 140,000 157,500 175,000 175,000
175,000
400,000 140,000 160,000 180,000 200,000 200,000
200,000
450,000 157,500 180,000 202,500 225,000 225,000
225,000
500,000 175,000 200,000 225,000 250,000 250,000
250,000
550,000 192,500 220,000 247,500 275,000 275,000
275,000
Estimated years of service for the named executive officers
eligible to receive the foregoing pension amounts are as follows:
Mr. Lawson, 10 years; Mr. Lindsay, 18 years; Mr. Nevins, 23 years;
Mr. Foreman, 26 years.
AGREEMENTS
The Company has an employment agreement with William H. Lawson,
Chairman and Chief Executive Officer. The agreement may be
terminated by either the Company or Mr. Lawson upon 90 days advance
written notice. Under the agreement, the Company, depending on the
reason for termination of employment, may be required to pay Mr.
Lawson his annual compensation, including bonus, for a period of one
year after termination and all stock options and stock appreciation
rights held by Mr. Lawson may become immediately exercisable. If
termination is effected in connection with a change in control of the
Company, the Company may be required to pay Mr. Lawson his annual
compensation for up to three years from the date of termination or
change in control, whichever is earlier, and to continue to provide
him with certain benefits under the Company's benefit plans in which
he was a participant at the time of his termination of employment.
Mr. Lindsay owes the Company $477,000 as of February 1, 1996 for
amounts borrowed in connection with a stock purchase under the
Company's 1988 Executive Stock Purchase Plan. The borrowing is
evidenced by a non-recourse promissory note bearing no interest, and
the related shares are pledged to secure repayment. The maximum
amount outstanding at any time during the last fiscal year was
$530,000. Mr. Lawson owed the Company a maximum amount of $812,500
during 1995 for amounts borrowed in connection with a stock purchase
under the Company's 1988 Executive Stock Purchase Plan. The
borrowing was evidenced by a non-recourse promissory note bearing no
interest, and was paid in full in 1995.
RATIFICATION OF THE APPOINTMENT
OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
The Board of Directors has appointed, subject to ratification by
the shareholders, the firm of Deloitte & Touche LLP as independent
auditors for the 1996 fiscal year. Although shareholder ratification
is not legally required, the Board of Directors believes it advisable
to submit its decision to the shareholders. Deloitte & Touche LLP
has acted as auditors for the Company since 1988.
Representatives of Deloitte & Touche are expected to be present
at the Annual Meeting with the opportunity to make a statement if
they desire to do so, and to be available to respond to questions
relating to their examinations of the Company's financial statements.
PROPOSED 1996 FRANKLIN ELECTRIC CO., INC.
EMPLOYEE STOCK OPTION PLAN
GENERAL
In the opinion of the Board of Directors, the Company and its
shareholders benefit substantially from having certain officers and
key employees acquire shares of its common stock through options
granted under a stock option plan. Options provide a strong
incentive for stock ownership which can contribute markedly to the
success and growth of the Company. An option plan aids the Company
in attracting and retaining employees in key management positions and
enables the Company to compete effectively with other enterprises for
the services of key employees.
In 1986, the Company adopted the 1986 Nonqualified Stock Option
Plan (the "1986 Employee Plan"). By July 14, 1995 substantially all
of the shares available under this Plan had been granted.
Accordingly, on December 8, 1995, the Board of Directors adopted the
1996 Franklin Electric Co., Inc. Employee Stock Option Plan (the
"1996 Employee Plan"), subject to shareholders' approval at the 1996
Annual Meeting, providing for 600,000 shares of the Company's Common
Stock which may be used for granting options under the plan. The
market price of the Common Stock on February 1, 1996 was $36.00 per
share.
The committee of the Board of Directors responsible for
administering the employee plans, with the approval of the entire
Board of Directors, granted an option of 40,000 shares under the 1986
Employee Plan and 60,000 shares under the 1996 Employee Plan to
William H. Lawson, Chairman and Chief Executive Officer of the
Company. The grant of 60,000 shares under the 1996 Employee Plan is
contingent upon shareholder approval of the Plan. The option price
under each grant to Mr. Lawson was $31.00 per share, which was the
market price on the date of the grant.
To date, the Committee has not yet granted other awards under
the 1996 Employee Plan nor has the Committee made any determinations
as to the number and identity of employees who might receive such
awards in the future.
The following is a summary of the 1996 Employee Plan, which is
qualified in its entirety by reference to the full text of the Plan
included in this Proxy Statement as Exhibit A.
ADMINISTRATION
The 1996 Employee Plan is to be administered by a committee (the
"Committee") of the Board of Directors. The Committee shall have the
power to select employees to participate, determine the size and
terms of option grants and establish such other provisions governing
the grant and exercise of options that are within its discretion.
DURATION OF THE PLAN
The 1996 Employee Plan shall remain in effect until all shares
subject to it have been purchased or acquired. However, in no event
may an award be granted on or after June 30, 2005. The Board of
Directors, however, can terminate the 1996 Employee Plan at any time
prior thereto.
TYPES OF AWARDS
To provide a flexible and competitive program, the Board has
approved the use of stock options and stock appreciation rights for
the 1996 Employee Plan. A stock option is the right to purchase
shares of the Company's Common Stock at a fixed price for a fixed
period of time in the future. Unless otherwise designated by the
Committee, the purchase price of the shares subject to any option
will be equal to the fair market value of the shares on the date of
the grant. The Committee administering the 1996 Employee Plan
determines the period during which the option can be exercised and
all options expire no later than ten years from the date on which the
option is granted.
The second type of award available under the 1996 Employee Plan
is a stock appreciation right. A stock appreciation right may be
granted in conjunction with a stock option. Under a stock
appreciation right, the Participant may surrender such right and
receive in exchange, payment in cash and/or stock equal to the excess
of the fair market value of one share of the Company's Common Stock
on the date of exercise over the related option price of one share of
the Company's common stock.
ALLOCATED SHARES
A total of 600,000 shares will be allocated to the 1996 Employee
Plan. This constitutes approximately 9 percent of the currently
outstanding shares. Generally no more than 300,000 shares may be
awarded to any one individual. All shares available are subject to
adjustments to be made by the Committee for a merger,
recapitalization, stock dividend, stock split or other similar change
affecting the number of outstanding shares of Common Stock of the
Company. Unpurchased shares subject to an option that lapses or
terminates without exercise are available for future awards.
EXERCISE OF OPTIONS AND PURCHASE PRICE
Upon the exercise of options, the Participant must deliver to
the Company the full purchase price of the shares being exercised
with such purchase price being paid in either cash or its equivalent.
Participants in the 1996 Employee Plan may also deliver common stock
of the Company having a then fair market value equivalent to the
purchase price, provided that such shares must have been held by the
Participant for at least six months prior to their delivery.
EMPLOYMENT TERMINATION
Unless otherwise determined by the Committee, in the event a
Participant's employment with the Company is terminated due to death
or disability, all options under the 1996 Employee Plan shall
immediately become fully vested on the date of termination and shall
be exercisable for the lesser of two years following the date of
termination or the expiration date of the option.
Unless otherwise determined by the Committee, in the event a
Participant's employment with the Company is terminated by any reason
other than death or disability, all options which are unvested at the
date of termination shall be forfeited to the Company. Options which
are vested at the date of termination shall be exercisable for the
lesser of six months following the date of termination or the
expiration date of the option.
CHANGE IN CONTROL
In order to protect the Participant's rights in the event of a
"Change in Control" of the Corporation (as defined in the Plan), the
Plan provides for the immediate vesting of all outstanding options
and stock appreciation rights.
MODIFICATION OF THE PLAN
Subject to any requirements for shareholder approval under
applicable law, the Board of Directors may amend the Plan at any
time. The Committee may amend or waive rules and regulations
governing the 1996 Employee Plan's administration, and amend the
terms and conditions of any outstanding award to the extent that such
terms and conditions are within the Committee's discretion as
provided in the Plan. No modification of the Plan that would
adversely affect the rights of Participants with respect to
outstanding options may be made without their consent.
FEDERAL TAX CONSEQUENCES
Options granted under the Plan are nonqualified stock options.
An Optionee receiving a nonqualified stock option is not subject to
federal income tax upon grant of the option. The Optionee will,
however, realize ordinary income at the time of the exercise to the
extent that the then fair market value of the Company's Common Stock
at the date of exercise, exceeds the exercise price. Subject to
certain requirements imposed by Section 162(m) of the Internal
Revenue Code, the Company will be entitled to a federal tax deduction
in an amount equal to the ordinary income realized by the Optionee in
connection with the stock option exercise.
The 1996 Employee Plan also provides for the grant of stock
appreciation rights. An Optionee receiving a stock appreciation
right will not be subject to federal income tax upon the grant of
such right. Upon exercise of the right, the Optionee will realize
ordinary income in the amount of the cash received. Subject to
certain requirements imposed by Section 162(m) of the Internal
Revenue Code, the Company will then be entitled to a federal tax
deduction in an amount equal to the ordinary income realized by the
Optionee.
Under Section 162(m) of the Internal Revenue Code, compensation
paid by the Corporation in excess of $1 million for any taxable year
to "Covered Employees" generally is deductible by the Corporation or
its affiliates for federal income tax purposes if it is based on the
performance of the Corporation, is paid pursuant to a plan approved
by shareholders of the Corporation, and meets certain other
requirements. Generally, "Covered Employee" under Section 162(m)
means the chief executive officer and the four other highest-paid
executive officers of the Corporation as of the last day of the
taxable year. It is presently intended that the Committee will at
all times consist of "Outside Directors" as required for purposes of
Section 162(m), and that the Committee will take the effect of
Section 162(m) into consideration in granting incentive awards under
this Plan.
The foregoing discussion of federal income tax consequences is a
summary only and is not intended to be a comprehensive analysis of
the subject matter.
VOTE REQUIRED
The vote required to approve the 1996 Employee Plan is the majority
of the shares voted.
PROPOSED 1996 FRANKLIN ELECTRIC CO., INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
GENERAL
In the opinion of the Board of Directors, the Company and its
shareholders benefit substantially from having directors acquire
shares of its common stock through options granted under a stock
option plan. Options provide a strong incentive for stock ownership
which can contribute markedly to the success and growth of the
Company. An option plan aids the Company in attracting and retaining
directors.
In 1990, the Company adopted the 1990 Nonemployee Director Stock
Option Plan (the "1990 Director Plan") and in approximately one year
all of the available options under this Plan will have been granted.
On December 8, 1995, the Board of Directors adopted the 1996
Nonemployee Director Stock Option Plan (the "1996 Director Plan"),
subject to shareholders' approval at the 1996 Annual Meeting,
providing for 90,000 shares of the Company's Common Stock which may
be used for granting options under the Plan. The market price of the
Common Stock on February 1, 1996 was $36.00 per share.
Each nonemployee director who is elected or reelected to serve
on the Board of Directors shall automatically be granted an option to
purchase 3,000 shares at an option price equal to the fair market
value of the Company's Common Stock on the date of grant. Juris
Vikmanis and Howard B. Witt will each receive an option to purchase
3,000 shares of the Company's common stock on April 12, 1996 under
the 1990 Director Plan, subject to their reelection to the Board of
Directors by shareholders. Beginning in the year 1997, the Company
anticipates it will automatically issue shares to outside directors
under the 1996 Director Plan because as of that date no remaining
shares will be available for grant under the 1990 Director Plan.
The following is a summary of the 1996 Director Plan, which is
qualified in its entirety by reference to the full text of the Plan
included in this Proxy Statement as Exhibit B.
ADMINISTRATION
The 1996 Director Plan is to be administered by the Board of
Directors of the Company (the "Board") subject to the restrictions
set forth in the Plan. The Board shall not have the discretionary
power to determine eligibility, the number, option price, vesting
period or the frequency and timing of awards. All such
determinations are made automatically pursuant to the provisions of
the Plan.
DURATION OF THE PLAN
The 1996 Director Plan shall remain in effect until all shares
subject to it have been purchased or acquired. However, in no event
may an award be granted on or after March 30, 2006. The Board of
Directors, however, can terminate the 1996 Director Plan at any time
prior thereto.
TYPES OF AWARDS
The 1996 Director Plan permits the use of stock options only. A
stock option is the right to purchase shares of the Company's Common
Stock at a fixed price for a fixed period of time in the future.
Participants in the 1996 Director Plan shall be eligible to exercise
their options within the time period beginning one (1) year after
grant of the option, and ending ten (10) years after the grant of the
option according to the following schedule: one-third of the options
shall vest on each of the first, second and third anniversaries of
the date of the grant of the options. Under the 1996 Director Plan,
the purchase price of the shares subject to any option must be equal
to the fair market value of the shares on the date of the grant.
ALLOCATED SHARES
A total of 90,000 shares will be allocated to the 1996 Director
Plan. This constitutes approximately 1 percent of the currently
outstanding shares. All shares available under each plan are subject
to adjustments to be made by the Board for a merger,
recapitalization, stock dividend, stock split or other similar change
affecting the number of outstanding shares of Common Stock of the
Company. Unpurchased shares subject to an option that lapses or
terminates without exercise are available for future awards.
EXERCISE OF OPTIONS AND PURCHASE PRICE
Upon the exercise of options, the Participant must deliver to
the Company the full option price of the shares being exercised with
such purchase price being paid in either cash or its equivalent.
TERMINATION FROM BOARD OF DIRECTORS
In the event the service of a Participant on the Board is
terminated by reason of death or disability, any outstanding options
granted under the 1996 Director Plan to that Participant that are not
exercisable as of the date of death or disability immediately shall
be forfeited to the Company.
To the extent an option is exercisable as of the date of death
or disability it shall remain exercisable at any time prior to its
expiration date, or for two years after the date of death, whichever
period is shorter.
If the service of the Participant on the Board shall terminate
for any reason other than for death or disability, any outstanding
options under the 1996 Director Plan held by the Participant that are
not exercisable as of the date of termination shall immediately be
forfeited to the Company.
To the extent an option is exercisable as of the date of
termination of the Participant's service on the Board, it shall
remain exercisable at any time prior to its expiration date, or for
six months after the date the Participant's service on the Board
terminates, whichever period is shorter.
CHANGE IN CONTROL
In order to protect the Participant's rights in the event of a
"Change in Control" of the Corporation (as defined in the Plan), the
Plan provides for the immediate vesting of all outstanding options.
MODIFICATION OF THE PLAN
Subject to any requirements for shareholder approval under
applicable law, the Board of Directors may amend the Plan at any time
subject to certain restrictions as set forth in the Plan. The terms
and conditions of the Director Plan are fixed pursuant to the
provisions of the Plan. No modification of the Plan that would
adversely affect the rights of Participants with respect to
outstanding options may be made without their consent.
FEDERAL TAX CONSEQUENCES
Options granted under the Plan are nonqualified stock options.
An Optionee receiving a nonqualified stock option is not subject to
federal income tax upon grant of the option. The Optionee will,
however, realize ordinary income at the time of the exercise to the
extent that the then fair market value of the Company's Common Stock
at the date of exercise, exceeds the exercise price. The Company will
be entitled to a federal tax deduction in an amount equal to the
ordinary income realized by the Optionee in connection with the stock
option exercise.
The foregoing discussion of federal income tax consequences is a
summary only and is not intended to be a comprehensive analysis of
the subject matter.
VOTE REQUIRED
The vote required to approve the 1996 Director Plan is the majority
of the shares voted.
SHAREHOLDER PROPOSALS
November 14, 1996 is the date by which proposals of shareholders
intended to be presented at the next annual meeting must be received
by the Company to be considered for the inclusion in the Company's
proxy statement for the 1997 Annual Meeting.
OTHER BUSINESS
Management has no knowledge of any other matters to be presented
for action by the shareholders at the 1996 Annual Meeting. The
enclosed proxy gives discretionary authority to the persons
designated as proxies therein to vote on any additional matters that
should properly and lawfully be presented.
By order of the Board of Directors
Dated: March 8, 1996
Dean W. Pfister, Secretary
APPENDIX 1
<TABLE>
FRANKLIN ELECTRIC PROXY
Franklin Electric Co., Inc.
400 East Spring Street
Bluffton, IN 46714
<S> <C>
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints William H. Lawson and Dean W. Pfister as Proxies, and each of
them, with full power of substitution, with all power the undersigned would posses if
personally present, and to vote all shares of common stock of Franklin Electric Co., Inc. held
of record by the undersigned on February 23, 1996, which the undersigned would be entitled to
vote at the Annual Meeting of Shareholders to be held on April 12, 1996 or any adjournment or
postponement thereof.
1. ELECTION OF DIRECTORS. Proposal to elect John B. Lindsay, Juris Vikmanis, and Howard B.
Witt as directors to serve until the 1999 Annual Meeting of Shareholders,
FOR all nominees[ ] WITHHOLD AUTHORITY to vote for all nominees[ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a line through
the nominee's name in the list below.)
John B. Lindsay Juris Vikmanis Howard B. Witt
2. APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to ratify the appointment of Deloitte &
Touche LLP as independent auditors for the 1996 fiscal year.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. PROPOSAL TO APPROVE THE 1996 EMPLOYEE STOCK OPTION PLAN.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. PROPOSAL TO APPROVE THE 1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting, or any adjournment or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS
1,2,3, and 4.
Please sign exactly as name appears below. When shares are held by joint tenants, both should
sign. When signing as attorney, as executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by authorized
person.
DATED________________________________, 1996
___________________________________________
Signature
___________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
APPENDIX 2
1996 NONEMPLOYEE
DIRECTOR STOCK OPTION PLAN
Franklin Electric Co., Inc.
November 1995
CONTENTS
Article 1. Establishment, Purpose, and Duration
Article 2. Definitions and Construction
Article 3. Administration
Article 4. Shares Subject to the Plan
Article 5. Eligibility and Participation
Article 6. Nonqualified Stock Options
Article 7. Change in Control
Article 8. Amendment, Modification, and Termination
Article 9. Miscellaneous
FRANKLIN ELECTRIC CO., INC.
1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Franklin Electric Co., Inc., an
Indiana corporation (hereinafter referred to as the "Company"),
hereby establishes an incentive compensation plan to be known as the
"1996 Franklin Electric Co., Inc. Nonemployee Director Stock Option
Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Nonqualified Stock Options to
Nonemployee Directors, subject to the terms and provisions set forth
herein.
Upon approval by the Board of Directors of the Company, subject
to ratification within twelve (12) months by an affirmative vote of a
majority of Shares of the Common Stock present and entitled to vote
at the Annual Meeting at which a quorum is present, the Plan shall
become effective as of April 1, 1996 (the "Effective Date"), and
shall remain in effect as provided in Section 1.3 herein.
1.2. PURPOSE OF THE PLAN. The purpose of the Plan is to promote
the achievement of long-term objectives of the Company by linking the
personal interests of Nonemployee Directors to those of Company
shareholders, and to attract and retain Nonemployee Directors of
outstanding competence.
1.3. DURATION OF THE PLAN. The Plan shall commence on April 1,
1996 and shall remain in effect, subject to the right of the Board of
Directors to amend or terminate the Plan at any time pursuant to
Article 8.1 herein, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in
no event may an Award be granted under the Plan on or after March 30,
2006.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1. DEFINITIONS. Whenever used in the Plan, the following
terms shall have the meanings set forth below and, when the meaning
is intended, the initial letter of the word is capitalized:
(a) "Award" means a grant of Nonqualified Stock Options under
this Plan.
(b) "Award Agreement" means an agreement entered into by the
Company and each Participant setting forth the terms and provisions
applicable to Awards granted under this Plan.
(c) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act.
(d) "Board" or "Board or Directors" means the Board of
Directors of Franklin Electric Co., Inc., and includes any committee
of the Board of Directors designated by the Board to administer part
or all of this Plan.
(e) "Change in Control" of the Company shall be deemed to have
occurred if the conditions set forth in any one or more of the
following paragraphs shall have been satisfied:
(i) Any Person (other than the Person in control of
the Company on the Effective Date, or other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as
their ownership of Shares of the Company), is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) The election to the Board of Directors of the
Company, without the recommendation or approval of a majority of the
incumbent Board of Directors, of the lesser of (a) three directors,
or (b) directors constituting a majority of the numbers of directors
then in office; or
(iii) The stockholders of the Company approve (a) a
plan of complete liquidation of the Company; or (b) an agreement for
the sale or disposition of all or substantially all the Company's
assets; or (c) a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity) at least 50% of the combined voting securities
of the Company (or such surviving entity) outstanding immediately
after such merger or consolidation.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to a Participant, if that Participant is
part of a purchasing group which consummates the Change-in-Control
transaction. A Participant shall be deemed "part of a purchasing
group" for purposes of the preceding sentence if the Participant is
an equity participant or has agreed to become an equity participant
in the purchasing company or group (except for (i) passive ownership
of less than 3% of the Shares of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group
which is otherwise not deemed to be significant, as determined prior
to the Change in Control by a majority of the disinterested
Directors).
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Company" means Franklin Electric Co., Inc., an Indiana
corporation, and the Company's subsidiaries, as well as any successor
to any such entities, as provided in Section 9.3 herein.
(h) "Director" means any individual who is a member of the
Board of Directors of the Company.
(i) "Disability" means a permanent and total disability, within
the meaning of Code Section 22(e)(3), as determined by the Board in
good faith.
(j) "Employee" means any full-time, nonunion, salaried employee
of the Company. For purposes of this Plan, an individual whose only
employment relationship with the Company is as a Director, shall not
be deemed to be an Employee.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor Act thereto.
(l) "Fair Market Value" means the closing sale price of a Share
on the principal securities exchange on which the Shares are publicly
traded, or if there is no such sale on the relevant date, then on the
last previous day on which a sale was reported.
(m) "Nonemployee Director" means any individual who is a member
of the Board of Directors of the Company, but who has never otherwise
been an Employee of the Company.
(n) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares, granted under Article 6 herein, which is not
intended to meet the requirements of Code Section 422.
(o) "Option" means a Nonqualified Stock Option granted under
this Plan.
(p) "Participant" means a Nonemployee Director of the Company
who has outstanding an Award granted under the Plan.
(q) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d).
(r) "Shares" means the $.10 par value common stock of the
Company.
(s) "Subsidiary" means any corporation, partnership, joint
venture, affiliate, or other entity in which the Company has a
majority voting interest, and which the Committee designates as a
participating entity in the Plan.
2.2. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine; the plural shall include the singular and the singular
shall include the plural.
2.3. SEVERABILITY. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1. THE BOARD OF DIRECTORS. The Plan shall be administered by
the Board of Directors of the Company, subject to the restrictions
set forth in this Plan.
3.2. ADMINISTRATION BY THE BOARD. The Board shall have the full
power, discretion, and authority to interpret and administer this
Plan in a manner which is consistent with the Plan's provisions.
However, in no event shall the Board have the sole and exclusive
power to determine Plan eligibility, or to determine the number, the
purchase price, the vesting period, or the frequency and timing of
Awards to be made under the Plan to any Participant (all such
determinations are automatic pursuant to the provisions of this
Plan).
3.3. DECISIONS BINDING. All determinations and decisions made
by the Board pursuant to the provisions of the Plan and all related
orders or resolutions of the Board shall be final, conclusive, and
binding on all Persons, including the Company, its stockholders,
employees, Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1. NUMBER OF SHARES. Subject to adjustment as provided in
Section 4.3 herein, no more than ninety thousand (90,000) Shares
shall be eligible for purchase by Participants pursuant to Options
granted under this Plan.
4.2. LAPSED AWARDS. If any Option granted under this Plan
terminates, expires, or lapses for any reason, any Shares subject to
purchase pursuant to such Option again shall be available for the
grant of an Option under the Plan.
4.3. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other
change in the corporate structure of the Company affecting the
Shares, such adjustment shall be made in the number and class of
and/or price of Shares subject to outstanding Options granted under
this Plan, as may be determined to be appropriate and equitable by
the Board, in its sole discretion, to prevent dilution or enlargement
of rights; and provided that the number of Shares subject to any
Option shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Persons eligible to participate in this Plan
are limited to Nonemployee Directors.
5.2. ACTUAL PARTICIPATION. Subject to the provisions of Article
6 of this Plan, all Nonemployee Directors shall receive grants of
Options upon election and/or reelection to serve on the Board of
Directors.
ARTICLE 6. NONQUALIFIED STOCK OPTIONS
6.1. GRANTS OF OPTIONS. Subject to the limitation on the number
of Shares subject to this Plan, each individual who is not an
Employee and who is elected or reelected during the term of this Plan
by the stockholders of the Company to serve on the Board of
Directors, shall be granted an Option to purchase three thousand
(3,000) Shares upon each such election and/or reelection to serve on
the Board.
6.2. LIMITATION ON GRANT OF OPTIONS. Other than those grants of
Options set forth in Section 6.1, no additional Options shall be
granted under this Plan.
6.3. AWARD AGREEMENT. Each Option grant shall be evidenced by
an Award Agreement that shall specify the Option Price, the duration
of the Option, and the number of Shares available for purchase under
the Option as set forth in this Plan.
6.4. OPTION PRICE. The purchase price per Share available for
purchase under an Option shall be equal to the Fair Market Value of
such Share on the date the Option is granted.
6.5. DURATION OF OPTIONS. Each Option shall expire on the tenth
(10th) anniversary date of its grant.
6.6. VESTING OF SHARES SUBJECT TO OPTION. Participants shall be
entitled to exercise Options at any time and from time to time,
within the time period beginning one (1) year after grant of the
Option, and ending ten (10) years after grant of the Option, and
according to the following vesting schedule: one-third of the Options
shall vest on each of the first, second, and third anniversaries of
the date of grant of the Options.
6.7. PAYMENT. Options shall be exercised by the delivery of a
written notice of exercise to the Secretary of the Company, setting
forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to
the Company in full in cash or its equivalent.
As soon as practicable after receipt of a written notification
of exercise and full payment, the Company shall deliver to the
Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased pursuant
to the exercise of the Option.
6.8. TERMINATION OF SERVICE ON BOARD OF DIRECTORS DUE TO DEATH
OR DISABILITY. In the event the service of a Participant on the Board
is terminated by reason of death or Disability, any outstanding
Options granted to that Participant that are not exercisable as of
the date of death (or as of the date that the definition of
Disability is satisfied, as applicable) immediately shall be
forfeited to the Company (and shall once again become available for
grant under the Plan).
To the extent an Option is exercisable as of the date of death
(or as of the date that the definition of Disability is satisfied, as
applicable), it shall remain exercisable at any time prior to its
expiration date, or for two (2) years after the date of death (or the
date that the definition of Disability is satisfied, as applicable),
whichever period is shorter, by the Participant or such person or
persons as shall have been named as the Participant's legal
representative or beneficiary, or by such persons that have acquired
the Participant's rights under the Option by will or by the laws of
descent and distribution.
6.9. TERMINATION OF SERVICE ON BOARD OF DIRECTORS FOR OTHER
REASONS. If the service of the Participant on the Board shall
terminate for any reason other than for death or Disability, any
outstanding Options held by the Participant that are not exercisable
as of the date of termination immediately shall be forfeited to the
Company (and shall once again become available for grant under the
Plan).
To the extent an Option is exercisable as of the date of
termination of the Participant's service on the Board, it shall
remain exercisable at any time prior to its expiration date, or for
six (6) months after the date the Participant's service on the Board
terminates, whichever period is shorter.
6.10. NONTRANSFERABILITY OF OPTIONS. No Option granted
under this Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, all Options granted to a
Participant under this Plan shall be exercisable during his or her
lifetime only by such Participant.
6.11. RESTRICTIONS ON SHARE TRANSFERABILITY. The Board may
impose such restrictions on any Shares acquired pursuant to the
exercise of an Option under this Plan, as it may deem advisable,
including, without limitation, restrictions under applicable Federal
securities laws, under the requirements of any Stock exchange or
market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such
Shares.
ARTICLE 7. CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Options
granted under this Plan that are still outstanding and not yet vested
and exercisable, shall become immediately one hundred percent (100%)
vested and exercisable in each Participant, as of the first date that
the definition of Change in Control has been fulfilled, and shall
remain as such for the remaining life of the Option, as such life is
provided herein, and within the provisions of the related Award
Agreements. All Options that are exercisable as of the Change in
Control shall remain as such for the remaining life of the Options.
ARTICLE 8. AMENDMENT, MODIFICATION, AND TERMINATION
8.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at
any time and from time to time alter, amend, suspend, or terminate
the Plan in whole or in part; provided, however, that no amendment
which fails to comply with the exemptions available under Rule 16b-3
of the Exchange Act, including any successor to the Rule, shall be
effective.
8.2. OPTIONS PREVIOUSLY GRANTED. Unless required by law,
no termination, amendment, or modification of this Plan shall in any
manner adversely affect any Option previously granted under this
Plan, without the written consent of the Participant holding the
Option.
ARTICLE 9. MISCELLANEOUS
9.1. INDEMNIFICATION. Each individual who is or shall have been
a member of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she
may be involved by reason of any action taken or failure to act under
this Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Company's approval, or paid by him or
her in satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the
same before he or she undertakes to handle and defend it on his or
her own behalf.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such individuals may be
entitled under the Company's Certificate of Incorporation or Bylaws,
as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
9.2. BENEFICIARY DESIGNATION. Each Participant under this Plan
may, from time to time, name any beneficiary or beneficiaries (who
may be named contingently or successively) to whom any benefit under
this Plan is to be paid in the event of his or her death. Each
designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Board, and will be
effective only when filed by the Participant in writing with the
Board during his or her lifetime. In the absence of any such
designation or if all beneficiaries predecease the Participant,
benefits remaining unpaid at the Participant's death shall be paid to
the Participant's estate.
9.3. SUCCESSORS. All obligations of the Company under this
Plan, with respect to Awards granted hereunder, shall be binding on
any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
9.4. REQUIREMENTS OF LAW. The granting of Options under this
Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national
securities exchanges as may be required.
9.5. GOVERNING LAW. To the extent not preempted by Federal law,
this Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Indiana.
APPENDIX 3
1996 EMPLOYEE STOCK OPTION PLAN
Franklin Electric Co., Inc.
November 1995
CONTENTS
Article 1. Establishment, Objectives, and Duration
Article 2. Definitions
Article 3. Administration
Article 4. Shares Subject to the Plan and Maximum Awards
Article 5. Eligibility and Participation
Article 6. Stock Options
Article 7. Tandem Stock Appreciation Rights
Article 8. Beneficiary Designation
Article 9. Rights of Employees
Article 10. Change in Control
Article 11. Amendment, Modification, and Termination
Article 12. Withholding
Article 13. Indemnification
Article 14. Successors
Article 15. Legal Construction
FRANKLIN ELECTRIC CO., INC.
1996 EMPLOYEE STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Franklin Electric Co., Inc., an
Indiana corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as the "1996
Franklin Electric Co., Inc. Employee Stock Option Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options and Tandem Stock
Appreciation Rights (SARs).
Subject to approval by the Company's stockholders, the Plan shall
become effective as of July 1, 1995 (the "Effective Date") and shall
remain in effect as provided in Section 1.3 herein.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to
optimize the profitability and growth of the Company through incentives
which are consistent with the Company's goals and which link and align
the personal interests of Participants to those of the Company's
stockholders; to provide Participants with an incentive for excellence in
individual performance; to promote teamwork among Participants; and to
aid the Company in attracting and retaining Participants who make
significant contributions to the Company's success.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect,
subject to the right of the Board of Directors to amend or terminate the
Plan at any time pursuant to Article 11 herein, until all Shares subject
to it shall have been purchased or acquired according to the Plan's
provisions. However, in no event may an Award be granted under the Plan
on or after June 30, 2005.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
meanings set forth below, and when the meaning is intended, the initial
letter of the word shall be capitalized:
2.1 "AWARD" means a grant of Nonqualified Stock Options or Tandem
SARs under this Plan.
2.2 "AWARD AGREEMENT" means an agreement entered into by
the Company and each Participant setting forth the terms and provisions
applicable to Awards granted under this Plan.
2.3 "BENEFICIAL OWNER" or "Beneficial Ownership" shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of
the Company.
2.5 "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if the conditions set forth in any one or more of the following
paragraphs shall have been satisfied:
(i) Any Person (other than the Person in control of the Company on
the Effective Date, or other than a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same
proportions as their ownership of Shares of the Company), is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
securities; or
(ii) The election to the Board of Directors of the Company, without
the recommendation or approval of a majority of the incumbent
Board of Directors, of the lesser of (a) three directors, or
(b) directors constituting a majority of the numbers of
directors then in office; or
(iii) The stockholders of the Company approve (a) a plan of
complete liquidation of the Company; or (b) an agreement for
the sale or disposition of all or substantially all the
Company's assets; or (c) a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least 50% of the combined voting securities of the Company
(or such surviving entity) outstanding immediately after such
merger or consolidation.
However, in no event shall a Change in Control be deemed to have
occurred, with respect to a Participant, if that Participant is part
of a purchasing group which consummates the Change-in-Control
transaction. A Participant shall be deemed "part of a purchasing
group" for purposes of the preceding sentence if the Participant is
an equity participant or has agreed to become an equity participant
in the purchasing company or group (except for (i) passive ownership
of less than 3% of the Shares of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group
which is otherwise not deemed to be significant, as determined prior
to the Change in Control by a majority of the disinterested
Directors).
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
2.7 "COMMITTEE" means the Stock Option Committee of the Board, as
specified in Article 3 herein, or such other Committee appointed by the
Board to administer the Plan with respect to grants of Awards.
2.8 "COMPANY" means Franklin Electric Co., Inc., an Indiana
corporation, and the Company's subsidiaries, as well as any successor to
any of such entities as provided in Article 14 herein.
2.9 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.10 "DISABILITY" means a permanent and total disability, within
the meaning of Code Section 22(e)(3), as determined by the Board in good
faith.
2.11 "EFFECTIVE DATE" shall have the meaning ascribed to such term
in Section 1.1 hereof.
2.12 "EMPLOYEE" means any employee of the Company. Nonemployee
Directors shall not be considered Employees under this Plan unless
specifically designated otherwise.
2.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.14 "FAIR MARKET VALUE" means the closing sale price of a Share on
the principal securities exchange on which the Shares are publicly
traded, or if there is no such sale on the relevant date, then on the
last previous day on which a sale was reported.
2.15 "INSIDER" shall mean an individual who is, on the relevant
date, an officer, director or ten percent (10%) beneficial owner of any
class of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act, all as defined under Section 16 of the
Exchange Act.
2.16 "NAMED EXECUTIVE OFFICER" means a Participant who, as of the
date of vesting and/or payout of an Award, as applicable, is one of the
group of "covered employees," as defined in the regulations promulgated
under Code Section 162(m), or any successor statute.
2.17 "NONEMPLOYEE DIRECTOR" means an individual who is a member of
the Board of Directors of the Company, but who has never otherwise been
an Employee of the Company.
2.18 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to
purchase Shares granted under Article 6 herein and which is not intended
to meet the requirements of Code Section 422.
2.19 "OPTION" means a Nonqualified Stock Option granted under this
Plan.
2.20 "OPTION PRICE" means the price at which a Share may be
purchased by a Participant pursuant to an Option.
2.21 "PARTICIPANT" means an Employee who has outstanding an Award
granted under the Plan.
2.22 "PERFORMANCE-BASED EXCEPTION" means the performance-based
exception from the tax deductibility limitations of Code Section 162(m).
2.23 "PERSON" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
2.24 "SHARES" means the $.10 par value common stock of the Company.
2.25 "SUBSIDIARY" means any corporation, partnership, joint
venture, affiliate, or other entity in which the Company has a majority
voting interest, and which the Committee designates as a participating
entity in the Plan.
2.26 "TANDEM SAR" or "SAR" means an Award that is granted in
connection with a related Option pursuant to Article 7 herein, the
exercise of which shall require forfeiture of the right to purchase a
Share under the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall similarly be canceled).
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Stock
Option Committee of the Board, or by any other Committee appointed by the
Board consisting of not less than two (2) Nonemployee Directors who
fulfill the requirements for an exempt grant transaction under Rule 16b-3
of the Exchange Act. The members of the Committee shall be appointed from
time to time by, and shall serve at the discretion of, the Board of
Directors.
The Committee shall be comprised solely of Nonemployee Directors who
are eligible to administer the Plan pursuant to Rule 16b-3 of the
Exchange Act. However, if for any reason the Committee does not qualify
to administer the Plan as contemplated by Rule 16b-3 of the Exchange Act,
the Board of Directors may appoint a new Committee so as to comply with
Rule 16b-3.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select
Employees who shall participate in the Plan; determine the terms and
conditions of Awards in a manner consistent with the Plan; construe and
interpret the Plan and any agreement or instrument entered into under the
Plan; establish, amend, or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 11 herein)
amend the terms and conditions of any outstanding Award to the extent
such terms and conditions are within the discretion of the Committee as
provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration
of the Plan. As permitted by law, the Committee may delegate its
authority as identified herein.
The Committee shall keep minutes of its meetings. A majority of the
Committee shall constitute a quorum, and only the acts of a majority of
the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee, shall be valid acts
of the Committee.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders
and resolutions of the Board shall be final, conclusive and binding on
all persons, including the Company, its stockholders, Employees,
Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.2, the number of Shares hereby reserved for
issuance upon the exercise of Options granted under the Plan shall be six
hundred thousand (600,000). If any Option granted hereunder shall expire
or terminate for any reason without having been exercised in full, the
unpurchased Shares subject thereto shall again be available for issuance
under this Plan.
Unless and until the Committee determines that an Award to a Named
Executive Officer shall not be designed to comply with the Performance-
Based Exception, the maximum aggregate number of Options and Tandem SARs
that may be granted or that may vest, as applicable, pursuant to any
Award held by any Named Executive Officer shall be three hundred thousand
(300,000) during the term of the Plan.
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change
in corporate capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the
definition of such term in Code Section 368) or any partial or complete
liquidation of the Company, such adjustment shall be made in the number
and class of Shares available for issuance and in the number and class of
and/or price of Shares subject to outstanding Awards granted under the
Plan, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award
shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan
include all officers and key employees of the Company who, in the opinion
of the Committee, are materially responsible for the management, growth,
and protection of all or a material part of the business or major product
lines or major functions of the Company or its Subsidiaries.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan,
the Committee may, from time to time, select from all eligible Employees,
those to whom Awards shall be granted and shall determine the nature and
amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the
Plan, Options may be granted to one or more Participants in such number,
and upon such terms, and at any time and from time to time as shall be
determined by the Committee.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an
Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains, and such other
provisions as the Committee shall determine.
6.3 OPTION PRICE. Unless otherwise designated by the Committee at
the time of grant, the Option Price for each grant of an Option under
this Plan shall be equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted; provided, however,
that the Option Price designated by the Committee shall be at least equal
to fifty percent (50%) of the Fair Market Value of a Share on the date
the Option is granted.
6.4 DURATION OF OPTIONS. Each Option granted to an Employee shall
expire at such time as the Committee shall determine at the time of
grant; provided, however, that unless otherwise designated by the
Committee at the time of grant, no Option shall be exercisable later than
the tenth (10th) anniversary date of its grant.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall
be exercisable at such times and be subject to such restrictions and
conditions as are set forth in the applicable Award Agreement, which need
not be the same for each grant or for each Participant.
6.6 PAYMENT. OPTIONS GRANTED under this Article 6 shall be
exercised by the delivery of a written notice of exercise to the Company,
setting forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by
tendering previously acquired Shares having an aggregate Fair Market
Value at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the Participant
for at least six (6) months prior to their tender to satisfy the Option
Price).
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant,
in the Participant's name, Share certificates in an appropriate amount
based upon the number of Shares purchased under the Option(s).
In the event that a Tandem SAR is granted with an Option, the
exercise of such related Option shall cause the surrender of the right to
exercise the equivalent portion of the related Tandem SAR.
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities
laws, under the requirements of any stock exchange or market upon which
such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee, in the event a Participant's employment with the Company
and/or its Subsidiaries is terminated due to death or Disability, all
Options shall immediately become fully vested on the date of termination
and shall be exercisable for the lesser of two (2) years following the
date of termination or the expiration date of the Option.
Unless otherwise determined by the Committee, in the event a
Participant's employment with the Company and/or its Subsidiaries is
terminated for any reason other than death or Disability, all Options
which are unvested at the date of termination shall be forfeited to the
Company; Options which are vested at the date of termination shall be
exercisable for the lesser of six (6) months following the date of
termination or the expiration date of the Option.
6.9 NONTRANSFERABILITY OF OPTIONS. Except as otherwise provided in
a Participant's Award Agreement, no Option granted under this Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
ARTICLE 7. TANDEM STOCK APPRECIATION RIGHTS
7.1 GRANT OF TANDEM SARs. Subject to the terms and conditions of
the Plan, Tandem SARs may be granted to Participants at any time and from
time to time as shall be determined by the Committee. Subject to the
terms and conditions of the Plan, the Committee shall have complete
discretion in determining the number of Tandem SARs granted to each
Participant (provided, however, that in no event shall the number of
Tandem SARs granted exceed the number of related Options) and, in
determining the terms and conditions pertaining to such Tandem SARs. The
grant price of Tandem SARs shall equal the Option Price of the related
Option.
7.2 EXERCISE OF TANDEM SARs. Tandem SARs may be exercised for all
or part of the Shares subject to the related Option upon the surrender of
the right to exercise the equivalent portion of the related Option. A
Tandem SAR may be exercised only with respect to the Shares for which its
related Option is then exercisable.
7.3 TANDEM SAR AGREEMENT. Each Tandem SAR grant shall be evidenced
by an Award Agreement that shall specify the grant price, the term of the
Tandem SAR, and such other provisions as the Committee shall determine.
7.5 TERM OF TANDEM SARs. The term of Tandem SARs granted under the
Plan shall be determined by the Committee, in its sole discretion;
provided, however, that unless otherwise designated by the Committee,
such term shall not exceed the term of the related Option.
7.6 PAYMENT OF TANDEM SAR AMOUNT. Upon exercise of a Tandem SAR, a
Participant shall be entitled to receive payment from the Company in an
amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price; by
(b) The number of Shares with respect to which the Tandem SAR is
exercised.
At the election of Participant and upon approval by the Committee,
the payment upon Tandem SAR exercise may be in cash, in Shares of
equivalent value, or in any combination thereof.
7.7 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of
the Plan, the Committee may impose such conditions on exercise of a
Tandem SAR (including, without limitation, the right of the Committee to
limit the time of exercise to specified periods) as may be required to
satisfy the requirements of Section 16 of the Exchange Act (or any
successor rule).
7.8 TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee, in the event a Participant's employment with the Company
and/or its Subsidiaries is terminated due to death or Disability, all
Tandem SARs shall immediately become fully vested on the date of
termination and shall be exercisable for the lesser of two (2) years
following the date of termination or the expiration date of the Tandem
SAR.
Unless otherwise determined by the Committee, in the event a
Participant's employment with the Company and/or its Subsidiaries is
terminated for any reason other than death or Disability, all Tandem SARs
which are unvested at the date of termination shall be forfeited to the
Company; Tandem SARs which are vested at the date of termination shall be
exercisable for the lesser of six (6) months following the date of
termination or the expiration date of the Tandem SAR.
7.9 NONTRANSFERABILITY OF TANDEM SARs. Except as otherwise provided
in a Participant's Award Agreement, no Tandem SAR granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all Tandem SARs granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant.
ARTICLE 8. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of
his or her death before he or she receives any or all of such benefit.
Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be
effective only when filed by the Participant in writing with the Company
during the Participant's lifetime. In the absence of any such designation
or if all beneficiaries predecease the Participant, benefits remaining
unpaid at the Participant's death shall be paid to the Participant's
estate.
ARTICLE 9. RIGHTS OF EMPLOYEES
9.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit
in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to
continue in the employ of the Company.
For purposes of this Plan, a transfer of a Participant's employment
betweenthe Company and a Subsidiary, or between Subsidiaries, shall not
be deemed to be a termination of employment. Upon such a transfer, the
Committee may make such adjustments to outstanding Awards as it deems
appropriate to reflect the changed reporting relationships.
9.2 PARTICIPATION. No Employee shall have the right to be selected
to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
ARTICLE 10. CHANGE IN CONTROL
10.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a
Change in Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governing
governmental agencies or national securities exchanges, any and all
Options and Tandem SARs granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire term.
10.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 10 may not be
terminated, amended, or modified to affect adversely any Award
theretofore granted under the Plan without the prior written consent of
the Participant with respect to said Participant's outstanding Awards.
ARTICLE 11. AMENDMENT, MODIFICATION, AND TERMINATION
11.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at
any time and from time to time, alter, amend, suspend or terminate the
Plan in whole or in part; provided, however, that no amendment which
fails to comply with the exemptions available under Rule 16b-3 of the
Exchange Act, including any successor to such Rule, shall be effective.
The Committee shall not have the authority to cancel outstanding
Awards and issue substitute Awards in replacement thereof.
11.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no
termination, amendment, or modification of the Plan shall adversely
affect in any material way any Award previously granted under the Plan,
without the written consent of the Participant holding such Award.
11.3 COMPLIANCE WITH CODE SECTION 162(m). At all times when Code
Section 162(m) is applicable, all Awards granted under this Plan shall
comply with the Performance-Based Exception requirements of Code
Section 162(m); provided, however, that in the event the Committee
determines that such compliance is not desired with respect to any Award
or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that
changes are made to Code Section 162(m) to permit greater flexibility
with respect to any Award or Awards available under the Plan, the
Committee may, subject to this Article 11, make any adjustments it deems
appropriate.
ARTICLE 12. WITHHOLDING
12.1 TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with
respect to any taxable event arising as a result of this Plan.
12.2 SHARE WITHHOLDING. With respect to withholding required upon
the exercise of Options or Tandem SARs, Participants may elect, subject
to the approval of the Committee, to satisfy the withholding requirement,
in whole or in part, by having the Company withhold Shares having a Fair
Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be imposed on the transaction. All such
elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that
the Committee, in its sole discretion, deems appropriate.
ARTICLE 13. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or
of the Board, shall be indemnified by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim,
action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act
under the Plan. Such person shall be indemnified by the Company for all
amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of any judgement in any
such action, suit, or proceeding against him or her, provided he or she
shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on
his or her own behalf. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or Bylaws,
as a matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.
ARTICLE 14. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
ARTICLE 15. LEGAL CONSTRUCTION
15.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine;
the plural shall include the singular and the singular shall include the
plural.
15.2 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
15.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance
of Shares under the Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
15.4 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Indiana.
