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:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY (AS
PERMITTED BY RULE 14A-6
(E) (2))
[ ] 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)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
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(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
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[ ] 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.
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<PAGE>
P R E L I M I N A R Y C O P Y
FRANKLIN ELECTRIC
400 East Spring Street
Bluffton, Indiana 46714
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
April 17, 1998 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 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 17,
1998, AT 10:00 A.M., E.S.T., FOR THE FOLLOWING PURPOSES:
1. To elect two directors for terms expiring at the 2001 Annual Meeting of
Shareholders;
2. To approve an amendment to the Franklin Electric Co., Inc. Amended 1988
Executive Stock Purchase Plan;
3. To approve an amendment to the Restated Certificate of Incorporation to
increase the number of shares of authorized common stock; and
4. To ratify the appointment of Deloitte & Touche LLP as independent auditors
for the 1998 fiscal year;
5. 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 27, 1998 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, Secretary
Bluffton, Indiana
March 6, 1998
<PAGE>
FRANKLIN ELECTRIC CO., INC.
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 1998
GENERAL INFORMATION
This 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 to be held on
April 17, 1998 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 6, 1998. 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 a 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 approval of the amendment to the Franklin Electric Co.,
Inc. Amended 1988 Executive Stock Purchase Plan, FOR the approval of the
amendment to the Restated Certificate of Incorporation to increase the number
of authorized shares of common stock, FOR the ratification of the appointment
of Deloitte & Touche LLP as independent auditors for the 1998 fiscal year, 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) by executing
and delivering a subsequently dated proxy, or (iii) 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 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 27, 1998 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 5,867,560 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. As a result, abstentions and broker
non-votes will not have any effect on the voting results with respect to any
of the matters scheduled to be submitted to shareholders at the Annual
Meeting.
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, 1998. 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 590,829 (1) 10.07
110 W. Berry Street
Fort Wayne, IN 46801
Northern Trust Corporation 498,515 (2) 8.50
50 S. LaSalle Street
Chicago, IL 60675
Marvin C. Schwartz 481,995 (3)(4) 8.22
c/o Neuberger & Berman
605 Third Avenue
New York, NY 10158
Patricia Schaefer 480,021 (3)(5) 8.17
5400 Deer Run Court
Muncie, IN 47304
<PAGE>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Diane D. Humphrey 462,021 (3) 7.88
2279 East 250 North Road
Bluffton, IN 46714
William H. Lawson 361,217 (6) 5.86
400 East Spring Street
Bluffton, IN 46714
Ruane, Cunniff & Co., Inc. 315,093 (7) 5.37
1370 Avenue of the Americas
New York, NY 10019
(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 186,815 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 404,014 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) Northern Trust Corporation holds these shares as Trustee under the
Company's defined benefit pension plans. These shares will be voted
pursuant to the direction of the Employee Benefits Committee of the
Company. Northern Trust Corp. does not have investment power over any
of these shares.
(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 and a greater that 5% beneficial owner of the Company's
Common Stock) for a total consideration of $8,400,000; (ii) 175,000
shares from Diane D. Humphrey (a greater that 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 various
clients, including Marvin C. Schwartz (a greater that 5% beneficial
owner of the Company's Common Stock) for a total consideration of
$7,200,000.
(4) According to a Schedule 13D filed with the SEC on January 13, 1994,
Marvin C. 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 481,995
shares of the Company's Common Stock of which he has sole investment and
sole voting power with respect to 392,668 shares, shared investment
power with respect to 89,327 shares and no shared voting power.
(5) Includes 9,000 shares issuable pursuant to stock options exercisable
within 60 days after January 31, 1998.
(6) Includes 293,576 shares issuable pursuant to stock options exercisable
within 60 days after January 31, 1998. Mr. Lawson has no investment
power with respect to 1,535 of these shares and no voting power with
respect to 198 of these shares.
(7) According to a Schedule 13G filed with the SEC on February 13, 1998,
Ruane, Cunniff & Co., Inc. has sole investment power with respect to
315,093 shares, sole voting power with respect to 80,025 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, 1998. 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 480,021(1) 8.17
William H. Lawson 361,217(1)(2)(3) 5.86
John B. Lindsay 224,560(1)(2)(3) 3.80
William J. Foreman 41,450(1)(2)(3) *
Donald J. Schneider 38,238(1) *
Kirk M. Nevins 29,173(1)(2)(3) *
Donald R. Hobbs 27,494(1)(2)(3) *
Jess B. Ford 21,239(1)(2)(3) *
Robert H. Little 13,042(1) *
Gerard E. Veneman 11,548(1) *
Juris Vikmanis 10,000(1) *
Howard B. Witt 4,200(1) *
All directors and 1,262,182(1)(2)(3) 19.98
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, 1998 as follows: Ms. Schaefer, 9,000 shares; Mr.
Lawson, 293,576 shares; Mr. Lindsay, 40,000 shares; Mr. Foreman, 26,000
shares; Mr. Schneider, 8,000 shares; Mr. Nevins, 10,000 shares; Mr.
Hobbs, 20,000 shares; Mr. Ford, 21,000 shares; Mr. Little, 9,000 shares;
Mr. Veneman, 6,000 shares; Mr. Vikmanis, 5,000 shares; Mr. Witt, 4,000
shares; and all directors and executive officers as a group, 451,576
shares.
(2) Includes shares held by the ESOP Trustee as to which the individuals do
not have investment power as follows: Mr. Lawson, 1,535; Mr. Lindsay,
1,284; Mr. Foreman, 1,064; Mr. Nevins, 1,034; Mr. Hobbs, 911; Mr. Ford,
120; and all directors and executive officers as a group, 5,948.
(3) Includes shares held by the 401(k) Plan Trustee as to which the
individuals do not have voting power as follows: Mr. Lawson, 198; Mr.
Lindsay, 2,970; Mr. Foreman, 3,886; Mr. Nevins, 7,939; Mr. Hobbs, 2,143;
Mr. Ford, 119; and all directors and executive officers as a group,
17,255.
<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 1997. As previously reported in the 1996 Proxy Statement, Mr. Donald
J. Schneider received a stock option grant from the Company in April, 1995.
Mr. Schneider inadvertently failed to file a Form 5 to report this
transaction. This omission was corrected in February, 1998.
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. Two 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.
William H. Lawson and Donald J. Schneider have been nominated to serve as
directors of the Company. Mr. Lawson and Mr. Schneider are currently
directors of the Company. Both nominees have indicated their willingness to
serve as a director if elected. If, however, either 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 2001
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
William H. Lawson, 61 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, 62 President of Schneider National 1988
Director of the Company Inc., an asset based logistics
company. Director of Green Bay
Packers and St. Norbert College.
CONTINUING DIRECTORS
- --------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1999
NAME AND POSITION AGE PRINCIPAL OCCUPATION
John B. Lindsay, 55 President of the Company 1996
President and since October 1995. Executive
Director of the Company Vice President of the Company
from 1993 to 1995. Director,
Old First National Bank.
Juris Vikmanis, 60 Retired in 1993; Formerly Vice 1988
Director of the Company President, 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, 57 Chairman of the Board since 1993, 1994
Director of the Company President and Chief Executive
Officer since 1990, Littelfuse,
Inc.; a manufacturer of
electronic, electrical and
automotive fuses.
Director, Artisan Funds, Inc.
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
Robert H. Little, 62 Retired in 1997; Formerly 1987
Director of the Company President, Waddle Manufacturing
Inc., a producer of precision
fabrications for the
electronics and medical
device industries.
Patricia Schaefer, 67 Retired; Director Muncie Public 1982
Director of the Company Library; Muncie, Indiana.
Gerard E. Veneman, 77 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.
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") and the 1996 Nonemployee Director Stock
Option Plan (the "1996 Director Plan"). These Plans provide 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 11, 1997, Robert H. Little, Patricia Schaefer, and Gerard E. Veneman
each received upon their re-election to the Board at the 1997 Annual Meeting
an option to purchase 3,000 shares at an exercise price of $41.50 per share.
Subsequent to these options granted at the 1997 Annual Meeting, no further
shares are available for issuance under 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. During 1997,
Mr. Kraus, Dr. N. A. Lamberti and Mr. William W. Keefer, who retired in 1985,
1988 and 1996, with 29, 19 and 28 years of service, respectively, participated
in this Plan. Messrs. Kraus and Lamberti each received an annual fee of
$15,000 in 1997. Mr. Keefer received an annual fee of $20,000 in 1997.
<PAGE>
The Board held five (5) regularly scheduled meetings during 1997 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
except for Mr. Veneman.
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 1997.
PERSONNEL AND COMPENSATION COMMITTEE. Members of the Personnel and
Compensation Committee (the "Compensation Committee") currently are Donald J.
Schneider (Chairman), Gerard E. Veneman, William H. Lawson, 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 two (2) meetings in
1997.
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. THE CHIEF EXECUTIVE OFFICER 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
incentive cash bonus approximates the market value of compensation 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 70 percent of
base salary for 1997.
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. No stock option awards were granted to
officers during 1997.
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.
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 1997 and is not expected to have an effect on
compensation payable in 1998.
D. J. Schneider G. E. Veneman
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), (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, 1992 through
December 31, 1997. In each case, the graph assumes the investment of $100 on
December 31, 1992.
$300
282<F1>
252<F3>
221<F2>
$200 196<F1>
189<F3>
155<F2> 188<F2>
149<F1> 144<F1> 153<F3>
115<F2> 112<F3> 141<F1>
$100 110<F3> 111<F2>
$0
1992 1993 1994 1995 1996 1997
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
1995 through 1997 for the Company's Chief Executive Officer and the Company's
other executive officers who received compensation in excess of $100,000
during 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
BONUS SECURITIES
(PERFORMANCE UNDERLYING
NAME AND BASED OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY INCENTIVE) (# OF SHARES) COMPENSATION<F1>
- ------------------ ---- ------ --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
William H. Lawson, 1997 $414,000 $290,000 - $19,548
Chairman of the 1996 383,000 203,000 - 14,465
Board and Chief 1995 383,000 100,000 100,000 28,501
Executive Officer
John B. Lindsay, 1997 $270,000 $189,000 - $15,229
President 1996 239,500 148,000 - 5,250
1995 208,000 85,000 - 5,250
Jess B. Ford,<F2> 1997 $175,000 $122,500 - $5,600
Vice President and 1996 160,000 99,000 15,000 5,250
Chief Financial
Officer
William J. Foreman,<F3> 1997 $135,000 $94,500 - $5,744
Vice President 1996 125,000 77,000 - 5,250
1995 111,500 75,000 - 5,250
Donald R. Hobbs,<F4> 1997 $135,000 $94,500 - $5,600
Vice President, 1996 115,104 71,000 10,000 5,250
Submersible Motor
Marketing
Kirk M. Nevins,<F3> 1997 $135,000 $94,500 - $5,600
Vice President, 1996 125,000 77,000 10,000 7,654
Sales 1995 117,000 50,000 - 5,250
<FN>
<F1> All Other Compensation for 1997 reflects (i) Company matching
contributions to defined contribution plans for each executive officer
in the amount of $5,600; (ii) reimbursement of $386, $4,436, and $144,
of taxes paid for Mr. Lawson, Mr. Lindsay and Mr. Foreman, respectively;
(iii) an anniversary bonus of $5,192 for Mr. Lindsay under the Company's
policy to reward all employees who achieve twenty-five years of service
with a payment equal to one week's base pay; and (iv) premiums incurred
by the Company in the amount of $13,562 in connection with Mr. Lawson's
executive split-dollar insurance arrangements that restore his benefits
to the level in effect when he was first employed by the Company
adjusted for benefit increases, if any, awarded to all covered
employees.
<F2> Mr. Ford was hired by the Company in October, 1995.
<F3> Mr. Nevins and Mr. Foreman were elected executive officers of the
Company in July, 1995.
<F4> Mr. Hobbs was elected executive officer of the Company in April, 1996.
</FN>
</TABLE>
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Fiscal Fiscal
on Value Year-End (#) Year-End($)
Exercise Realized(1) Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable(2)
William H. Lawson 24,669 $1,306,125 293,576/16,000 $13,028,761/$604,000
John B. Lindsay - - 40,000/10,000 $1,510,000/$377,500
Jess B. Ford - - 21,000/24,000 $647,250/$654,000
William J. Foreman 3,500 $471,599 26,000/ 4,000 $1,160,250/$151,000
Donald R. Hobbs - - 20,000/10,000 $902,750/$253,500
Kirk M. Nevins 4,000 $195,500 10,000/10,000 $346,500/$253,500
(1) Based on the excess of the fair market value of the Common Stock on the
date of exercise over the option exercise price.
(2) Based on the excess of the fair market value of the Common Stock of
$64 1/4 on January 3, 1998 over the option exercise price.
<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 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 $ 85,500 $ 97,100
200,000 70,000 80,000 90,000 100,000 106,500 121,600
250,000 87,500 100,000 112,500 125,000 127,500 146,100
300,000 105,000 120,000 135,000 150,000 150,000 170,600
350,000 122,500 140,000 157,500 175,000 175,000 195,100
400,000 140,000 160,000 180,000 200,000 200,000 219,600
450,000 157,500 180,000 202,500 225,000 225,000 244,100
500,000 175,000 200,000 225,000 250,000 250,000 268,600
550,000 192,500 220,000 247,500 275,000 275,000 293,100
600,000 210,000 240,000 270,000 300,000 300,000 317,600
Estimated years of service for the named executive officers eligible to
receive the foregoing pension amounts are as follows: Mr. Lawson, 12 years;
Mr. Lindsay, 20 years; Mr. Ford, 2 years; Mr. Foreman, 28 years; Mr. Hobbs, 13
years; Mr. Nevins, 25 years.
<PAGE>
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 owes the Company $352,000 as of January 31, 1998 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 $452,000.
APPROVAL OF AN AMENDMENT TO THE
FRANKLIN ELECTRIC CO., INC. AMENDED 1988
EXECUTIVE STOCK PURCHASE PLAN
GENERAL
The Franklin Electric Co., Inc. Amended 1988 Executive Stock Purchase
Plan (the "Plan") provides key employees of the Company with an opportunity to
purchase shares of common stock of the Company on favorable financing terms,
as described below. The purpose of the Plan is to promote the interests of
the Company and its shareholders by providing appropriate incentives to key
employees which (i) further the identity of interest between such employees
and the Company's shareholders and (ii) enable the Company to recruit and
retain those persons with the ability to contribute significantly to the
Company's success.
The Plan was approved by the shareholders of the Company at the 1988
annual meeting of shareholders. At its meeting on February 13, 1998, the
Board of Directors of the Company unanimously adopted, on the recommendation
of the Personnel and Compensation Committee (the "Committee"), certain
amendments to the Plan, including an amendment which would, subject to and
effective upon receipt of shareholder approval, extend the term of the Plan
for an additional ten (10) years to April 17, 2008 (the "Amendment"). If the
proposed Amendment is approved by the shareholders of the Company, Section 19
of the Plan would be amended to read as follows:
"19. Effective Date; Term of Plan. The Plan was adopted by
the Board on February 19, 1988 and became effective in April 1988
upon approval by the shareholders of the Company at the 1988
annual meeting of shareholders. The Plan was amended by the Board
on February 13, 1998, including an amendment with respect to the
term of the Plan which became effective on April 17, 1998 upon
approval by the shareholders of the Company at the 1998 annual
meeting of shareholders. Shares may be sold under the Plan for a
period ending on April 17, 2008, unless the Plan is sooner
terminated as provided herein."
<PAGE>
If the Amendment is not approved by the shareholders of the Company, the
Plan will terminate, and no further shares may be sold by the Company under
the Plan. Except for the Amendment, no other changes are being proposed to
the Plan.
The following description of the Plan is qualified in its entirety by
reference to the full text of the Plan, a copy which is set forth as Exhibit A
to this Proxy Statement.
DESCRIPTION OF PLAN
Allocated Shares. A total of 888,000 shares of common stock are
available for purchase by eligible employees under the Plan. As of February
13, 1998, 375,200 shares of common stock had been purchased under the Plan,
thus leaving 512,800 shares available for future purchase under the Plan. The
shares available under the Plan may be authorized but unissued shares or
shares acquired by the Company and held in its treasury. The number of shares
available under the Plan is subject to adjustment for a merger,
recapitalization, stock dividend, stock split, or other similar change
affecting the number of outstanding shares of common stock of the Company.
Shares that are purchased under the Plan and subsequently reacquired by the
Company will be available for future purchases by employees under the Plan.
Eligible Employees. All executive officers and certain other key
employees of the Company are eligible to participate in the Plan. The Plan is
administered by the Committee, which determines the employees eligible to
participate in the Plan based upon the employee's position, responsibilities
and potential contributions to the creation of increases in value of the
Company, the value of such employees' services to the Company and other
factors which it deems pertinent. Approximately 100 employees of the Company
are currently eligible to receive awards under the Plan.
Types of Awards. The only type of award available under the Plan is the
Company's offer to sell shares to eligible employees. The Committee, in its
capacity as administrator of the Plan, determines the number of shares to be
offered to eligible employees and the date by which the offers must be
accepted by the employee. The purchase price for the shares is the closing
price of the Company's shares on the day prior to the day the employee accepts
the Company's offer to sell the shares to the employee under the Plan.
Acceptance and Financing. An employee must accept the offer by
delivering written notice of acceptance to the Company within the time
specified in the offer, or the offer is deemed withdrawn. At the time of
acceptance, the employee must pay at least ten percent (10%) of the aggregate
purchase price to the Company and enter into a written purchase agreement.
Under the terms of the Plan, the Company will finance up to ninety percent
(90%) of the aggregate purchase price of the shares offered for sale to an
eligible employee. The employee will be required to execute a promissory note
for the amount financed and the Company will be entitled to demand payment of
that note at any time. No regular principal payments will be required under
the note and the loan evidenced by the note will be an interest-free, non-
recourse loan. An employee who finances the purchase of shares under the Plan
will also be required to execute a pledge agreement. Pursuant to the terms of
the pledge agreement, the shares purchased by the employee will be pledged as
security for the repayment of the loan to the Company. An employee will have
no personal liability to repay any loan under the Plan, and the Company's only
remedy upon an employee's default in the payment of the note will be against
the shares pledged. Except as authorized by the Committee in its capacity as
administrator of the Plan, during the period that any amounts remain
<PAGE>
outstanding on a loan under the Plan, an employee will not be entitled to
sell, transfer, or otherwise dispose of the shares and will be prevented from
pledging the shares to any other party.
Receipt of Shares, Voting and Dividend Rights. Upon execution of the
purchase agreement, the promissory note and the pledge agreement and the
payment of the aggregate purchase price not financed by the Company, a stock
certificate for the pledged shares will be registered in the employee's name
but will be held in custody by the Company for the benefit of the employee.
The employee will receive all cash dividends payable with respect to the
pledged shares during the term of the loan and will be entitled to vote the
pledged shares.
Amendment or Termination of the Plan. The Board of Directors may amend
the Plan at any time. Shareholder approval, however, is required for any
amendment that increases the total number of common shares that may be sold
under the Plan, materially modifies the requirements as to eligibility for
participation in the Plan, materially modifies the provisions relating to the
purchase price or otherwise materially increases the benefits accruing to
employees under the Plan or extends the term of the Plan. As described below,
the purpose of the Amendment is to extend the term of the Plan.
Plan Benefits. The number of shares, if any, which may be offered to
eligible employees under the Plan in 1998 or thereafter is not now
determinable since awards under the Plan are within the discretion of the
Committee. No awards have been made under the Plan since 1995.
AMENDMENT EXTENDING THE TERM OF THE PLAN
Unless the Amendment is approved by the shareholders of the Company, the
Plan will terminate and no further shares will thereafter be sold under the
Plan. The Amendment, if approved by shareholders, would extend the term of
the Plan for an additional ten (10) years to April 17, 2008 and thereby permit
the sale of additional shares to key employees of the Company during that
period. The Board believes the Plan has served its purpose well and that the
proposed extension of the term of the Plan to April 17, 2008 will continue to
enhance the Company's ability to recruit and retain key employees by providing
them with incentives to purchase shares of common stock on favorable financing
terms.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The federal income tax consequences of the Plan depend, in part, upon
whether the shares purchased by an eligible employee will be considered, under
Section 83 of the Internal Revenue Code of 1986 as amended (the "Code"),
actually to have been transferred for federal income tax purposes at the time
of purchase under the Plan. Internal Revenue Service regulations issued under
Section 83 indicate that a purchase of shares by an employee financed in
substantial part by non-recourse debt, may be treated as either a transfer of
property or the grant of an option. The factors to be taken into account
include (i) the type of property involved, (ii) the extent to which the risk
that the property will decline in value has been transferred, and (iii) the
likelihood that the purchase price will, in fact, be paid. Because the
Internal Revenue Service generally has declined to issue rulings on this
question, and because the categorization is fact-driven, it cannot be said
with certainty whether a particular purchase of shares pursuant to the Plan
would be considered a property transfer or a grant of an option.
<PAGE>
If the purchase is treated as a transfer of the applicable shares at the
time of the purchase, the employee would realize no income for federal income
tax purposes with respect to the purchase because the purchase price is the
fair market value of the shares. If the initial transaction were treated
instead as the grant of an option, it appears that the employee would not
realize any income for federal income tax purposes until such time as the
employee bears the risk of a decline in value of the shares purchased and it
becomes likely that the purchase price will be paid. This point generally
would be reached when the employee is considered to have sufficient assets at
risk -- in other words, when the employee has invested enough capital in the
down payment and repayment of the debt to have surpassed a certain threshold.
It is at this point that a transfer of property will be deemed to have
occurred, and the employee will be subject to federal income tax, at ordinary
income rates, on an amount equal to the excess of the then fair market value
of the shares over the original purchase price. The Company generally would
be entitled to a federal income tax deduction in an identical amount at the
time the employee recognizes income, provided that the Company complies with
applicable withholding rules.
Another area of tax uncertainty with respect to the Plan arises as a
result of the interest-free loans made by the Company to the employees.
Usually, when a demand loan is made by an employer to an employee, the
employer is treated under Section 7872 of the Code as having received the
foregone interest from the employee and having paid an identical amount in
salary to the employee. The employer would thus be required to include the
foregone interest in its income and would generally be entitled to deduct the
foregone interest as compensation paid to the employee. The compensation
deduction is not allowed, however, if, in the case of a publicly held company,
the employee owns more than 0.5% of the voting shares of the company. The
normal tax treatment of an employee receiving an interest-free demand loan
follows from the treatment afforded the employer. Under Section 7872 of the
Code, the employee is treated as having paid the foregone interest and as
having received the foregone interest as additional compensation or a dividend
from the employer. Depending on the circumstances, the employee might be
entitled to a deduction for the foregone interest.
The normal tax treatment of interest-free loans will not necessarily
apply to the interest-free loans made pursuant to the Plan. Because, as
described above, an employee's purchase of shares pursuant to the Plan might
be treated as an option to purchase shares, rather than a true purchase, for
federal income tax purposes, the non-recourse debt of the employee might not
be considered a loan for federal income tax purposes. However, regulations
issued under Section 7872 of the Code indicate that transactions such as those
contemplated by the Plan will be characterized, for federal income tax
purposes, according to their economic substance, rather than by the terms used
to describe them. The Company believes that the economic substance of the
non-recourse debt of an employee under the Plan will be respected as a loan
for federal income tax purposes; accordingly, the Company has adopted the
position for reporting purposes that the imputed interest rules described
above will apply.
VOTE REQUIRED FOR APPROVAL
Approval of the Amendment requires the affirmative vote of the holders of
a majority of the shares of common stock present in person or represented by
proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE FRANKLIN ELECTRIC CO., INC. AMENDED 1988 EXECUTIVE STOCK
PURCHASE PLAN.
<PAGE>
APPROVAL OF AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
At its meeting on February 13, 1998, the Board of Directors unanimously
adopted, subject to shareholder approval, an amendment to the Company's
Restated Certificate of Incorporation (the "Restated Certificate of
Incorporation") to increase the number of shares of common stock, par value
$.10 per share, authorized for issuance from 10,000,000 to 25,000,000 shares.
If the amendment is approved by shareholders, ARTICLE VI of the Restated
Certificate of Incorporation would be amended to provide, in pertinent part,
that the shares of authorized capital stock shall be divided into, among
others, a class of "25,000,000 shares of Common Stock, par value $.10 per
share."
The Company currently is authorized to issue 10,000,000 shares of common
stock. As of February 13, 1998, there were 5,865,960 shares of common stock
issued and outstanding, and an additional 2,425,912 shares were reserved for
issuance under the Company's benefit plans or upon exercise of options issued
under such plans. As a result, as of February 13, 1998, a total of 1,708,128
authorized shares of common stock remained available for future issuance.
Adoption of the proposed amendment would increase the number of authorized
shares of common stock available for future issuance to 16,708,128 shares.
The additional shares of common stock for which authorization is sought
would be part of the existing class of common stock and, if and when issued,
would have the same rights and privileges as the currently outstanding shares
of common stock. Holders of shares of common stock do not have preemptive
rights to subscribe for and purchase any new or additional shares of common
stock or securities convertible into shares of common stock.
The purpose of increasing the number of authorized shares of common stock
is to provide additional authorized shares of common stock which may be issued
for such corporate purposes as the Board of Directors may determine in its
discretion, including, without limitation, stock splits, stock dividends or
other distributions, future financings, acquisitions and benefit plans. The
increase in the number of shares of common stock authorized for issuance would
enable the Company, as the need may arise, to take timely advantage of market
conditions and the availability of favorable opportunities without the delay
and expense associated with the holding of a special meeting of its
shareholders. Under the provisions of the Indiana Business Corporation Law, a
board of directors may issue authorized but unissued shares of common stock
without shareholder approval. Upon adoption of the amendment, the Board of
Directors would be authorized to issue additional shares of common stock at
such time or times, to such persons and for such consideration as it may
determine, except as may otherwise be required by law. Although the Company
anticipates that it may issue shares of common stock for one or more of the
foregoing purposes, the Company has no existing plans, understanding or
agreements for the issuance of any additional shares of common stock (other
than the shares under its benefit and stock option plans).
Except as required by law or as a condition to continued inclusion in the
Nasdaq National Market System, or listing on any stock exchange on which the
shares of common stock may in the future be listed, it is unlikely that
further authorization by vote of shareholders would be sought for any issuance
of the shares of common stock. Nasdaq rules currently require shareholder
approval as a condition of continued eligibility for designation as a National
Market System security in several instances, including issuances of shares in
acquisition transactions where the number of outstanding shares of common
stock could increase by 20% or more
<PAGE>
The decision of the Board of Directors to propose an amendment increasing
the number of shares of common stock authorized for issuance did not result
from any effort by any person to accumulate the Company's stock or effect a
change in control of the Company. However, one result of an increase may be
to help the Board discourage or render more difficult a change in control.
The additional shares could be used under certain circumstances to dilute the
voting power of, create voting impediments for, or otherwise frustrate the
efforts of, persons seeking to effect a takeover or gain control of the
Company, whether or not the change of control is favored by a majority of
unaffiliated shareholders. For example, such shares could be privately placed
with purchasers who might side with the Board in opposing a hostile takeover
bid. The issuance of any additional shares of common stock could also have
the effect of diluting the equity of existing holders and the earnings per
share of existing shares of stock.
The Company's Restated Certificate of Incorporation and By-Laws contain
certain provisions which may be viewed as having an antitakeover effect. The
Restated Certificate of Incorporation and By-Laws classify the Board into
three classes; provide that vacancies on the Board are to be filled by a
majority vote of directors (except that shareholders may fill vacancies on the
Board if a majority of the directors remaining in office are unable to agree
on a person to fill a vacancy and, in that event, call a special meeting of
shareholders for that purpose), and that directors so chosen shall hold office
until the end of the full term of the class in which the vacancy occurred; and
provide that directors may only be removed by a vote of the holders of not
less than two-thirds of the outstanding voting shares at a meeting of
shareholders. Under the Company's By-Laws, a shareholder who wishes to
nominate a candidate for election to the Board of Directors or to introduce
business to be considered at the annual meeting must give advance notice to
the Company. If the election of directors is to take place at an annual
meeting of shareholders, notice of a proposed nomination must be given no
later than 90 days before the anniversary date of the prior annual meeting.
If the election is to be held at a special meeting of shareholders called for
that purpose, notice of a proposed nomination must be given not later than the
close of business on the seventh day following the earlier of the date on
which notice of the special meeting was first given to shareholders or the
date on which public disclosure of the special meeting was made. Notice of
business to be brought before an annual meeting of shareholders must be given
no later than 90 days before the anniversary date of the prior meeting. The
By-Laws further provide that special meetings of shareholders may only be
called by the Chairman, President or a majority of the Board of Directors.
Amendment of the provisions of the Restated Certificate of Incorporation
relating to the number and classes of directors as fixed by the By-Laws
requires the vote of the holders of not less than two-thirds of the
outstanding voting shares, whereas the By-Laws may be amended only by the
Board of Directors of the Company. All of the foregoing provisions tend to
make a change in control of the Board more difficult or time consuming.
In addition, in February 1991, the Company adopted a Share Purchase
Rights Plan ("Rights Plan") and issued, as a dividend, one Preference Stock
Purchase Right (a "Right") for each outstanding share of common stock. Each
share of common stock issued since the date of that dividend also includes one
Right. Each Right, when exercisable, entitles the holder to buy one one-
hundredth of a share of Series I Junior Participating Preference Stock,
without par value, of the Company, at an exercise price of $50, subject to
<PAGE>
adjustment. The Rights become exercisable twenty (20) days after the date of
a public announcement that a person or group (i) has acquired 20% or more of
the voting power of the Company or (ii) has announced a tender or exchange
offer, following which it would hold 30% or more of the Company's voting
power. Upon the occurrence of certain specified events thereafter, each Right
entitles the holder to acquire that number of shares of common stock of the
Company (or shares of the acquirer under certain circumstances) having a
market value of two times the exercise price of the Right. The Company may
redeem the Rights at the price of $.01 per Right prior to the occurrence of an
event that causes the Rights to be exercisable. The Rights will expire on
February 28, 2001. The Rights Plan is designed to protect the value of the
shareholders' investment in the Company, while preserving the possibility of a
fair acquisition bid.
The affirmative vote of the holders of a majority of the votes cast at
the Annual Meeting is required to approve the amendment to the Restated
Certificate of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF AUTHORIZED COMMON STOCK FROM 10,000,000 TO 25,000,000.
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 1998 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 6, 1998 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 1999
Annual Meeting.
OTHER BUSINESS
Management has no knowledge of any other matters to be presented for
action by the shareholders at the 1998 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 6, 1998
Dean W. Pfister, Secretary
<PAGE>
EXHIBIT A
FRANKLIN ELECTRIC CO., INC. AMENDED
1988 EXECUTIVE STOCK PURCHASE PLAN
[ADDITIONS TO BE EFFECTED BY THE PROPOSED AMENDMENTS ARE UNDERLINED, AND
DELETIONS ARE ENCLOSED IN BRACKETS.]
1. PURPOSE.
-------
The purpose of the Executive Stock Purchase Plan ("Plan") is to promote
the interests of Franklin Electric Co., Inc. ("Company") and its shareholders
by providing an opportunity for key employees of the Company to purchase
common shares of the Company, thereby assuming entrepreneurial risk, in a
manner which will (a) provide an increased incentive for such key employees to
exert their best efforts on behalf of the Company, (b) strengthen the ability
of the Company to recruit and retain those persons possessing outstanding
competence and the ability to contribute significantly to the Company's
success and (c) further the identity of interest between such key employees
with the Company and its shareholders in order to maximize value to
shareholders.
2. SHARES SUBJECT TO PLAN.
----------------------
2.1. Aggregate Number of Shares. The aggregate number of common
shares which may be sold from time to time under the Plan is 888,000 shares;
provided, however, that any shares sold under the Plan and subsequently
reacquired by the Company shall again be available for sale under the Plan.
2.2. Adjustments. In the event that, as a result of a stock split,
stock dividend, combination of shares or any other change in the common
shares, or an exchange of the common shares for other securities, by
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization, liquidation or otherwise, (a) the number of common shares is
increased or decreased or (b) such common shares are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, the Board shall make appropriate adjustments to the
number and type of common shares then remaining as to which purchase rights
may be granted.
3. ELIGIBILITY.
-----------
Each executive officer or other key employee of the Company shall be
eligible to participate in the Plan. The Administrator of the Plan shall
designate the employees eligible to participate in the Plan. In determining
the employees eligible under the Plan and the number of shares to be offered
to each employee, the Administrator shall consider such employee's position,
responsibilities and potential contributions to the creation of increases in
value of the Company, the value of such employee's services to the Company,
and such other factors as the Committee deems pertinent.
<PAGE>
4. PURCHASE PRICE.
--------------
The purchase price per share shall be the closing price of a share on
the day prior to the date the employee accepts the offer to sell shares
pursuant to the plan.
5. OFFER AND ACCEPTANCE.
--------------------
5.1. Offer. At least once each year during the term of this Plan the
Administrator shall determine whether any shares will be offered to any
eligible employees. Within five (5) days of the date of any such
determination, the Administrator shall deliver written offers to sell shares
to the employees selected to receive the offers. In the offer, the
Administrator shall specify the number of shares to be offered to the eligible
employee and the date by which the offer must be accepted.
5.2. Acceptance of offer. An employee may accept an offer to sell
shares by delivering a written acceptance to the President or Secretary of the
Company. At the time of his acceptance, the employee shall also execute a
Purchase Agreement, a Demand Note and a Pledge Agreement and shall deliver
these documents along with his payment of ten percent (10%) of the aggregate
purchase price of the shares to the President or Secretary of the Company.
5.3. Time of Acceptance. Any offer to sell shares made pursuant to
this Plan must be accepted within the time specified in the offer. If
acceptance does not occur within the specified time, the offer shall be deemed
withdrawn.
5.4. Purchase Agreement. The Purchase Agreement to be executed by
employees purchasing shares under the Plan shall incorporate the relevant
terms and conditions of the Plan and such other terms and conditions not
inconsistent with the Plan as the Administrator shall determine. The
Administrator may impose terms and conditions in the Purchase Agreement which
may differ from those contained in any other Purchase Agreement entered into
with another employee or to the same employee at another time.
6. PAYMENT OF PURCHASE PRICE.
-------------------------
If the Administrator conditions any offer to sell shares on the
employee's acceptance of less than ninety percent (90%) financing, the
employee shall be permitted to pay the portion of the purchase price remaining
unpaid (after allowing for the ten percent (10%) payment and the amount to be
financed) at any time within sixty (60) days of his acceptance of the offer.
<PAGE>
7. FINANCING.
---------
7.1. Terms of the Loan. The Company shall make a nonrecourse loan to
an employee for up to ninety percent (90%) of the purchase price of the shares
purchased pursuant to the Plan. Such Loan shall be evidenced by a promissory
note (Demand Note), which shall contain the relevant terms and conditions set
forth in this Section 7 and such other terms and conditions not inconsistent
with the Plan as the Committee shall determine. Any such loan shall bear no
interest and shall be payable on demand. An employee may pay all or any part
of the loan balance at any time.
7.2. Maximum Amount of Loan. The Administrator shall have the
discretion to determine the maximum amount of loans to be made to any eligible
employee under the plan.
7.3. Security. The employee shall pledge the shares purchased to the
Company as security for repayment of the loan and such pledge shall be
evidenced by a Pledge Agreement, which shall contain the relevant terms and
conditions set forth in this Section 7.3 and such other terms and conditions
not inconsistent with the Plan as the Committee shall determine. The Pledge
Agreement shall require the employee to pledge all non-cash dividends and
distributions paid with respect to such shares and all non-cash property
distributed with respect to such pledged non-cash dividends and distributions
(less any portion of such non-cash dividends and distributions or non-cash
property which is applied to pay any tax due thereon) to the Company as
additional collateral for repayment of the Loan.
The employee will have no personal liability to repay any loans under
this Plan and the Company's only recourse with respect to such loans shall be
against the pledged shares pursuant to the terms of the Pledge Agreement.
7.4. Release of Shares. The Company shall not be required to release
any shares from the pledge until the entire loan made in connection with the
pledge of the purchased shares has been paid in full. The Administrator,
however, shall have the discretion to allow for the employee's sale, exchange
or other transfer of all or a portion of the pledged shares, provided
appropriate arrangements are made for the repayment of the loan with the
proceeds from such sale, exchange or other transfer or for the substitution of
collateral of comparable value.
7.5. Regulations. Every loan shall comply with all applicable laws,
regulations and rules of the Board of Governors of the Federal Reserve System
and any other governmental agency having jurisdiction.
7.6. Foreclosure. If an employee fails to make any payment required
under a loan when due, the Company may foreclose on the loan and otherwise
enforce its rights under the Plan or any agreement entered into pursuant to
the Plan.
<PAGE>
8. ISSUANCE OF SHARES.
------------------
8.1. Stock Certificates. Upon execution of the Purchase Agreement,
the note and the Pledge Agreement and receipt by the Company of the purchase
price for the shares, the shares will be deemed to be fully paid and
nonassessable common shares. Stock certificates representing the shares and
any other property pledged which is shares of stock shall be registered in the
employee's name, but shall be held in custody by the Company for his account.
8.2. Legends. Certificates representing shares pursuant to the Plan
shall bear such legends as the Company may deem appropriate.
8.3. Securities and Other Laws. Certificates shall not be issued with
respect to shares purchased under the Plan unless the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, all relevant state securities
laws, the rules and regulations promulgated under any of the foregoing, and
the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the purchase of shares under the Plan, the Company may
require the person purchasing the shares to represent and warrant at the time
of purchase that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
9. RIGHTS AS A SHAREHOLDER.
-----------------------
Except as otherwise provided under the Plan or any agreement entered
into pursuant to the Plan, an employee who purchases shares pursuant to the
Plan shall have the same rights and privileges as any other shareholder
holding the same class of shares, including without limitation, the right to
vote such shares and to receive distributions and dividends on such shares or
other shares.
10. RIGHT OF REPURCHASE.
-------------------
As a condition to the purchase of shares under the Plan, the Company may
require that it have the right to repurchase the shares upon such terms and
conditions as determined by the Administrator.
11. ALTERNATIVE EQUITY PLANS.
------------------------
Nothing in this Plan shall be construed to preclude the Company from
maintaining stock option plans or other equity incentive plans in addition to
this Plan.
<PAGE>
12. ADMINISTRATION.
--------------
The Plan shall be administered by a committee consisting of not less
than three (3) members of the Board, as appointed by the Board of Directors.
The Administrator shall have the authority to administer and interpret
the Plan and take all actions incident thereto. The Administrator may from
time to time make such decisions and adopt such rules and regulations for
implementing the Plan as it deems appropriate. All the decisions and actions
of the Administrator shall be final unless overturned by the Board of
Directors.
13. WITHHOLDING OF TAXES.
--------------------
The Company shall have the right to require an employee to pay to the
Company the amount of any taxes that are required to be withheld with respect
to any non-cash dividends or distributions paid on such employee's shares, and
shall have the right to withhold the amount of any taxes that are required to
be withheld from any cash dividends or any repurchase proceeds.
14. EXPENSES.
--------
All expenses and costs in connection with the adoption and
administration of the Plan shall be borne by the Company except to the extent
recovered in accordance with the Pledge Agreement upon the foreclosure on the
security for any loan.
15. NO PRIOR RIGHT OR OFFER.
-----------------------
Except and until expressly granted, nothing in the Plan shall be deemed
to give any director, officer or employee, or his legal representatives or
assigns or any person or entity claiming under or through him, any contractual
or other right to participate in the benefits of the Plan.
16. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
The Board of Directors may amend the Plan at any time, provided that
shareholder approval shall be obtained for any amendment that (a) increases
the total number of common shares that may be sold under the Plan, (b)
materially modifies the requirements as to eligibility for participation in
the Plan, (c) materially modifies the provisions relating to the purchase
price or otherwise materially increases the benefits accruing to employees
under the Plan, or (d) extends the term of the Plan. The Plan may also be
discontinued or terminated by the Board, in whole or in part, at any time.
Notwithstanding the foregoing, no amendment, discontinuance or termination of
the Plan, without the consent of any persons affected thereby, shall alter or
impair any rights or obligations created prior to such amendment
discontinuance or termination.
<PAGE>
17. NO AGREEMENT TO EMPLOY.
----------------------
Nothing in the Plan or any purchase agreement for shares shall confer
upon any individual any right to continue in the employ of the Company for any
specified period of time or interfere with the right of the Company or any
Subsidiary or Parent or any of its subsidiaries to terminate such employment
at any time.
18. RIGHTS PERSONAL TO EMPLOYEE.
---------------------------
Any rights provided to any employee under the Plan shall be personal to
such employee, shall not be transferable (except by will or pursuant to the
laws of descent or distribution) and shall be exercisable, during his
lifetime, only by him.
19. EFFECTIVE DATE: TERM OF PLAN.
----------------------------
[The Plan was adopted by the Board on February 19, 1988 and shall become
effective upon the approval of the shareholders. Shares may be sold under the
Plan for a period of ten (10) years after the effective date, unless the Plan
is sooner terminated as provided therein.]
The Plan was adopted by the Board on February 19, 1988 and became
-----------------------------------------------------------------
effective in April 1988 upon approval by the shareholders of the Company at
- ---------------------------------------------------------------------------
the 1988 annual meeting of shareholders. The Plan was amended by the Board on
- ------------------------------------------------------------------------------
February 13, 1998, including an amendment with respect to the term of the Plan
- ------------------------------------------------------------------------------
which became effective on April 17, 1998 upon approval by the shareholders of
- -----------------------------------------------------------------------------
the Company at the 1998 annual meeting of shareholders. Shares may be sold
- ---------------------------------------------------------------------------
under the Plan for a period ending on April 17, 2008, unless the Plan is
- ------------------------------------------------------------------------
sooner terminated as provided herein.
- -------------------------------------
20. USE OF PROCEEDS.
---------------
The proceeds from the sale of common shares hereunder shall be used for
the general purposes of the Company.
<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, John B. Lindsay and Jess B.
Ford 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 27, 1998, which the undersigned would be entitled to
vote at the Annual Meeting of Shareholders to be held on April 17, 1998 or any
adjournment or postponement thereof.
1. ELECTION OF DIRECTORS. Proposal to elect William H. Lawson and Donald J.
Schneider as directors to serve until the 2001 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.)
William H. Lawson Donald J. Schneider
2. APPROVAL TO AMEND PLAN. Approval of Amendment to the Franklin Electric
Co., Inc. Amended 1988 Executive Stock Purchase Plan.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. APPROVAL TO AMEND RESTATED CERTIFICATE OF INCORPORATION. Approval of
amendment to the Restated Certificate of Incorporation to increase the number
of shares of authorized common stock.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to ratify the appointment
of Deloitte & Touche LLP as independent auditors for the 1998 fiscal year.
[ ]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.
<PAGE>
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 , 1998
--------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
