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 Section 240.14a-11 (e) or
Section 240.14a-12
FRANKLIN ELECTRIC CO., INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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<PAGE>
FRANKLIN ELECTRIC
400 East Spring Street
Bluffton, Indiana 46714
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
April 11, 1997 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 FRIDAY, APRIL 11, 1997, AT 10:00 A.M., E.S.T., FOR THE FOLLOWING
PURPOSES:
1. To elect three directors for terms expiring at the 2000 Annual
Meeting of Shareholders;
2. To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the 1997 fiscal year; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on February 28, 1997 will
be entitled to notice of and 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 which will revoke any previously
executed proxy.
By order of the Board of Directors.
DEAN W. PFISTER
Dean W. Pfister, Secretary
Bluffton, Indiana
March 7, 1997
<PAGE>
FRANKLIN ELECTRIC CO., INC.
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 11, 1997
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 11, 1997 or any
adjournment or postponement thereof. This Proxy Statement, together with the
Company's Annual Report to shareholders, including financial statements
contained therein, is being mailed to shareholders on or about March 7, 1997.
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, the shares represented thereby 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, 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 (i) delivering written notice of such
revocation to Mr. Dean W. Pfister, Secretary, 400 East Spring Street,
Bluffton, Indiana 46714, (ii) executing and delivering a subsequently dated
proxy, or (iii) 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 solicit 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.
<PAGE>
SHAREHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
The Board of Directors of the Company fixed the close of business on
February 28, 1997 as the record date (the "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 5,890,929 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.
Abstentions and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum but will not be counted as votes cast on
any matter submitted to shareholders. A "broker non-vote" occurs when a
broker holding shares in street name returns an executed proxy indicating that
the broker does not have discretionary authority to vote on 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
January 31, 1997. 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
Fort Wayne National Bank 613,374(1) 10.42
110 W. Berry Street
Fort Wayne, IN 46801
First Chicago NBD Corporation 521,815(2) 8.87
One First National Plaza
Chicago, IL 60670
Patricia Schaefer 479,021(3)(4) 8.13
405 S. Tara Lane
Muncie, IN 47304
Marvin C. Schwartz 475,296(3)(5) 8.08
c/o Neuberger & Berman
605 Third Avenue
New York, NY 10158
Diane D. Humphrey 462,021(3) 7.85
2434 N. Fairway Lane
Bluffton, IN 46714
Ruane, Cunniff & Co., Inc. 356,738(6) 6.06
767 Fifth Avenue, Suite 4701
New York, NY 10153
(1) Fort Wayne National Bank holds these shares as Trustee under the
Company's Employee Stock Ownership Plan (the "ESOP") and Directed
Investment Salary Plan (the "401(k) Plan"). The 185,657 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. The
Employee Benefits Committee is appointed by the Company's Board of
Directors to oversee the Company's employee benefit plans. 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 427,717 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.
(2) First Chicago NBD Corporation holds 498,515 of these shares as Trustee
under the Company's defined benefit pension plans. According to a
Schedule 13G filed with the Securities and Exchange Commission (the
"SEC") on February 4, 1997, First Chicago NBD Corp. has sole voting
power with respect to 23,300 shares, shared voting power with respect to
498,515 shares, sole investment power with respect to 23,300 shares, and
no shared investment power.
(3) Pursuant to the Company's Board-authorized stock repurchase program, on
January 29, 1997 the Company made the following purchases of the
Company's Common Stock in privately negotiated transactions at a price
of $48 per share: (i) 175,000 shares from Patricia Schaefer (a director
of the Company) for a total consideration of $8,400,000; (ii) 175,000
shares from Diane D. Humphrey (a greater than 5% beneficial owner of the
Company's Common Stock) for a total consideration of $8,400,000; and
(iii) 150,000 shares from Neuberger & Berman on behalf of its various
clients, including Marvin C. Schwartz (a greater than 5% beneficial
owner of the Company's Common Stock) for a total consideration of
$7,200,000.
(4) Includes 8,000 shares issuable pursuant to stock options exercisable
within 60 days after January 31, 1997.
(5) According to a Schedule 13D filed with the SEC on January 13, 1994,
Marvin Schwartz beneficially owned 507,160 shares of the Company's
Common Stock, of which he had sole investment and sole voting power with
respect to 422,570 shares, shared investment power with respect to
84,590 shares and no shared voting power. Subsequent to this Schedule
13D filing, Mr. Schwartz made further purchases and sales of the
Company's Common Stock (including the sale to the Company as described
in footnote 3). As a result, Mr. Schwartz beneficially owns 475,296
shares of the Company's Common Stock of which he has sole investment and
sole voting power with respect to 398,762 shares, shared investment
power with respect to 76,534 shares and no shared voting power.
(6) According to a Schedule 13G filed with the SEC on February 7, 1997,
Ruane Cunniff & Co., Inc. has sole investment power with respect to
356,738 shares, sole voting power with respect to 95,925 shares and no
shared voting or investment power.
<PAGE>
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 January 31, 1997. 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
Patricia Schaefer 479,021(1) 8.13
William H. Lawson 284,078(1)(2)(3) 4.66
John B. Lindsay 202,160(1)(2)(3) 3.42
William J. Foreman 38,617(1)(2)(3) *
Donald J. Schneider 35,610(1) *
Kirk M. Nevins 25,496(1)(2)(3) *
Donald R. Hobbs 21,293(1)(2)(3) *
Gerard E. Veneman 10,548(1) *
Robert H. Little 10,042(1) *
Juris Vikmanis 9,000(1) *
Jess B. Ford 6,067(1)(3) *
Howard B. Witt 2,200(1) *
All directors and 1,124,132(1)(2)(3) 18.13
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 after January 31, 1997, as follows: Ms. Schaefer, 8,000 shares; Mr.
Lawson, 206,245 shares; Mr. Lindsay, 20,000 shares; Mr. Foreman, 26,880
shares; Mr. Schneider, 7,000 shares; Mr. Nevins, 8,000 shares; Mr.
Hobbs, 14,000 shares; Mr. Veneman, 5,000 shares; Mr. Little, 8,000
shares; Mr. Vikmanis, 4,000 shares; Mr. Ford, 6,000 shares; Mr. Witt,
2,000 shares; and all directors and executive officers as a group,
315,125 shares.
(2) Includes shares held by the ESOP Trustee as to which the individuals do
not have investment power as follows: Mr. Lawson, 1,397; Mr. Lindsay,
1,149; Mr. Foreman, 931; Mr. Nevins, 902; Mr. Hobbs, 779; and all
executive officers as a group, 5,158.
(3) Includes shares held by the 401(k) Plan Trustee as to which the
individuals do not have voting power as follows: Mr. Lawson, 197; Mr.
Lindsay, 2,948; Mr. Foreman, 3,806; Mr. Nevins, 7,794; Mr. Hobbs, 2,074;
Mr. Ford, 67; and all executive officers as a group, 16,886.
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 and 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 1996.
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.
Robert H. Little, Patricia Schaefer and Gerard E. Veneman have been
nominated to serve as directors of the Company. Mr. Little, Ms. Schaefer, and
Mr. Veneman are currently directors of the Company. Each nominee has indicated
their 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.
<PAGE>
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 2000
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
Robert H. Little, 61 Retired; President, Waddle 1987
Director of the Company Manufacturing Inc., a producer
of precision metal fabrications
for the electronics and medical
device industries.
Patricia Schaefer, 66 Retired; Director Muncie Public 1982
Director of the Company Library; Muncie, Indiana.
Gerard E. Veneman, 76 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.
Continuing Directors
DIRECTORS WHOSE TERMS EXPIRE IN 1998
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
William H. Lawson, 60 Chairman of the Board and 1985
Chairman of the Board Chief Executive Officer of the
and Chief Executive Company. Director of Skyline
Officer Corporation and Sentry Insurance
a Mutual Company.
Donald J. Schneider, 61 President of Schneider National 1988
Director of the Company Inc., an asset based logistics
company. Director of Green Bay
Packers and St. Norbert College.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
John B. Lindsay, 54 President of the Company 1996
President and since October 1995. Executive
Director of the Company Vice President of the
Company from 1993 to
1995. Vice President
from 1986 to April 1993.
Director, Old First
National Bank.
Juris Vikmanis, 59 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, 56 Chairman of the Board 1994
Director of the Company since 1993, President and
Chief Executive Officer
since 1990, Littelfuse,
Inc.; a manufacturer of
electronic, electrical and
automotive fuses. Director,
Artisan Fund's Inc.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Directors who are not employees of the Company are 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 receives 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"), which provides for the automatic grant
on the date of the Annual Meeting of Shareholders of a nonqualified stock
option to purchase 3,000 shares of Common Stock to each nonemployee director
who is then elected or re-elected as a director by the shareholders. On April
12, 1996, Juris Vikmanis and Howard B. Witt each received upon their re-
election to the Board at the 1996 Annual Meeting an option to purchase 3,000
shares at an exercise price of $37.00 per share under the 1990 Director Plan.
Following the option grants at the 1997 Annual Meeting, no further shares
will be available for issuance under the 1990 Director Plan, and the 1990
Director Plan will be replaced with the 1996 Nonemployee Director Stock Option
Plan (the "1996 Director Plan"). The 1996 Director Plan has 90,000 shares of
Common Stock for issuance and is otherwise substantially identical to the 1990
Director Plan.
The Company has a Consulting Directors' Plan (the "Plan"), for
nonemployee directors who retire from Board service at age 70 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 of service as director. Currently,
Mr. Kraus, Dr. Lamberti and Mr. Keefer, who retired in 1985, 1988 and 1996,
with 29, 19 and 28 years of service, respectively, participate in this Plan.
Messrs. Kraus and Lamberti each received an annual fee of $15,000 in 1996.
Mr. Keefer received an annual fee of $20,000 in 1996.
The Board held five (5) regularly scheduled meetings during 1996 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), Patricia Schaefer and Juris Vikmanis. 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 1996.
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 three (3) meetings in 1996.
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.
<PAGE>
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. The Chief Executive Officer is a member of the
Committee. He does not participate in the Committee's determination of his
compensation package.
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 annual 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 53 percent of
base salary for 1996.
The annual compensation of the other executive officers includes a base
salary and an annual incentive cash bonus, determined similarly to that
described above for the Chief Executive Officer. The Committee awarded these
executive officers an incentive cash bonus of 62 percent of their base salary
for 1996.
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 1996, the Committee made a stock option
grant to three executive officers, Mr. Ford, Mr. Hobbs and Mr. Nevins, as a
part of their compensation package.
Section 162(m) of the Internal Revenue Code, which sets limitations on
the deductibility of executive compensation, did not affect compensation paid
to any executive officer in 1996 and is not expected to have an effect on
compensation payable in 1997.
G. E. Veneman D. J. Schneider
W. H. Lawson H. B. Witt
<PAGE>
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, 1995 and 1996 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 December 31, 1991 through December
31, 1996. In each case, the graph assumes the investment of $100 on December
31, 1991.
$300
262<F1>
206<F2>
$200 198<F1> 192<F1> 203<F3>
188<F1>
169<F2>
133<F1> 126<F2> 121<F2> 165<F3>
109<F2> 118<F3> 120<F3>
$100 108<F3>
$0
1991 1992 1993 1994 1995 1996
YEAR
<F1> FRANKLIN ELECTRIC
<F2> NASDAQ NON-FINANCIAL
<F3> S & P 500
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the years
1994 through 1996 for the Company's Chief Executive Officer and the Company's
other executive officers who received compensation in excess of $100,000
during 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
BONUS SECURITIES
(PERFORMANCE RESTRICTED UNDERLYING
NAME AND BASED STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY INCENTIVE) AWARD<F1> (# OF SHARES) COMPENSATION<F2>
- ------------------ ---- ------ ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William H. Lawson, 1996 $383,000 $203,000 - - $14,465
Chairman of the 1995 383,000 100,000 - 100,000 28,501
Board and Chief 1994 300,000 210,000 - 80,000 14,465
Executive Officer
John B. Lindsay, 1996 $239,500 $148,000 - - $5,250
President 1995 208,000 85,000 - - 5,250
1994 160,000 112,000 $530,000 50,000 5,250
Jess B. Ford,<F3> 1996 $160,000 $ 99,000 - 15,000 $5,250
Vice President and
Chief Financial
Officer
William J. Foreman, 1996 $125,000 $ 77,000 - - $5,250
Vice President<F4> 1995 111,500 75,000 - - 5,250
Donald R. Hobbs,<F5> 1996 $115,104 $ 71,000 - 10,000 $5,250
Vice President,
Submersible Motor
Marketing
Kirk M. Nevins,<F4> 1996 $125,000 $ 77,000 - 10,000 $7,654
Vice President, 1995 117,000 50,000 - - $5,250
Sales
<FN>
<F1> Messrs. Lindsay, Nevins and Foreman received awards in 1994 of 20,000,
5,000 and 7,000 shares, respectively, under the 1988 Stock Incentive
Award Plan. The December 28, 1996 market values of these shares were
$905,000, $226,250 and $316,750, respectively.
<F2> 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 $5,250 and $9,215, respectively, in each of 1996, 1995 and 1994.
Mr. Lawson was also reimbursed for $14,036 of taxes paid in 1995. In
addition, Mr. Nevins received a twenty-five year anniversary bonus of
$2,404 in 1996.
<F3> Mr. Ford was hired by the Company in October, 1995.
<F4> Mr. Nevins and Mr. Foreman were elected executive officers of the
Company in July, 1995.
<F5> Mr. Hobbs was elected executive officer of the Company in April, 1996.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Percent Realizable Value
Number of of Total at Assumed Annual
Securities Options Exercise Rates of Stock Price
Underlying Granted to or Appreciation for
Options Employees Base Option Term<F2>
Granted in Fiscal Price Expiration -------------------
Name (#)<F1> Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------ ---- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
William H. Lawson - - - - - -
John B. Lindsay - - - - - -
Jess B. Ford 15,000 14 $42.00 12/13/06 396,204 1,004,058
William J. Foreman - - - - - -
Donald R. Hobbs 10,000 9 $42.00 12/13/06 264,136 669,372
Kirk M. Nevins 10,000 9 $42.00 12/13/06 264,136 669,372
<FN>
<F1> Options were granted on December 13, 1996 and vest 20 percent each year
over a five-year period.
<F2> Amounts represent hypothetical gains that could be achieved based upon
assumed annual compound stock appreciation rates of 5 percent and 10
percent over the original full (10-year) term of the options. The 5
percent and 10 percent rates of stock appreciation are mandated by SEC
rules and do not represent the Company's estimate of the future market
price of its Common Stock.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Fiscal Fiscal
on Value Year-End (#) Year-End ($)
Exercise Realized<F1> Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable<F2>
- ---- -------- -------- ------------- -----------------
<S> <C> <C> <C> <C>
William H. Lawson 24,327 $775,788 206,245/128,000 6,727,081/2,040,000
John B. Lindsay 27,000 752,875 20,000/ 30,000 375,000/ 562,500
Jess B. Ford - - 6,000/ 39,000 79,500/ 366,750
William J. Foreman - - 26,880/ 12,000 879,069/ 225,000
Donald R. Hobbs 4,440 160,328 14,000/ 16,000 441,250/ 145,000
Kirk M. Nevins - - 8,000/ 16,000 221,500/ 145,000
<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 $45 1/4 on December
28, 1996.
</FN>
</TABLE>
<PAGE>
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 annual 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 $ 84,900 $ 96,400
200,000 70,000 80,000 90,000 100,000 105,900 120,900
250,000 87,500 100,000 112,500 125,000 126,900 145,400
300,000 105,000 120,000 135,000 150,000 150,000 169,900
350,000 122,500 140,000 157,500 175,000 175,000 194,400
400,000 140,000 160,000 180,000 200,000 200,000 218,900
450,000 157,500 180,000 202,500 225,000 225,000 243,400
500,000 175,000 200,000 225,000 250,000 250,000 267,900
550,000 192,500 220,000 247,500 275,000 275,000 292,400
600,000 210,000 240,000 270,000 300,000 300,000 316,900
Estimated years of service for the named executive officers eligible to
receive the foregoing pension amounts are as follows: Mr. Lawson, 11 years;
Mr. Lindsay, 19 years; Mr. Ford, 1 year; Mr. Foreman, 27 years; Mr. Hobbs, 12
years; and Mr. Nevins, 24 years.
AGREEMENTS
The Company has employment agreements with William H. Lawson, Chairman
and Chief Executive Officer, and Jess B. Ford, Vice President and Chief
Financial Officer (the "Employees"). The agreements may be terminated by
either the Company or the Employees upon 90 days advance written notice.
Under the agreements, the Company, depending on the reason for termination of
employment, may be required to pay the Employees their annual compensation,
including bonus, for a period of one year after termination and all stock
options and stock appreciation rights held by the Employees 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 and Mr. Ford their annual compensation for up to three years and two
years, respectively, from the date of termination or change in control,
whichever is earlier, and to continue to provide them with certain benefits
under the Company's benefit plans in which they were a participant at the time
of their termination of employment.
Mr. Lindsay, President, owes the Company $452,000 as of January 31, 1997
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 $477,000.
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 1997 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 auditor for the
Company since 1988.
Representatives of Deloitte & Touche LLP 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.
SHAREHOLDER PROPOSALS
November 7, 1997 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 1998
Annual Meeting.
OTHER BUSINESS
Management has no knowledge of any other matters to be presented for
action by the shareholders at the 1997 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 7, 1997
Dean W. Pfister, Secretary
<PAGE>
APPENDIX 1
FRANKLIN ELECTRIC PROXY
Franklin Electric Co., Inc.
400 East Spring Street
Bluffton, IN 46714
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 possess if personally present, and to vote all shares of
common stock of Franklin Electric Co., Inc. held of record by the undersigned
on February 28, 1997, which the undersigned would be entitled to vote at the
Annual Meeting of Shareholders to be held on April 11, 1997 or any adjournment
or postponement thereof.
1. ELECTION OF DIRECTORS. Proposal to elect Robert H. Little, Patricia
Schaefer and Gerard E. Veneman as directors to serve until the 2000 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.)
Robert H. Little Patricia Schaefer Gerard E. Veneman
2. APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to ratify the appointment
of Deloitte & Touche LLP as independent auditors for the 1997 fiscal year.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournment or
postponement 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 and 2.
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 , 1997
--------------------------------
- -------------------------------------------
Signature
- -------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
