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.
- ------------------------------------------------------------------------------
(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.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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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
it was determined):
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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.
(1) Amount Previously Paid:
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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 16, 1999 at 10:00 A.M., E.S.T.
To the Shareholders 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 16,
1999, AT 10:00 A.M., E.S.T., FOR THE FOLLOWING PURPOSES:
1. To elect three directors for terms expiring at the 2002 Annual Meeting of
Shareholders.
2. To approve amendments to the Restated Certificate of Incorporation with
respect to preferred stock.
3. To ratify the appointment of Deloitte & Touche LLP as independent auditors
for the 1999 fiscal year; and
4. 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 26, 1999
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 5, 1999
<PAGE>
FRANKLIN ELECTRIC CO., INC.
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
-----------------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 16, 1999
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 16, 1999 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 5, 1999. 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 amendments to the Restated Certificate of
Incorporation, FOR the ratification of the appointment of Deloitte & Touche
LLP as independent auditors for the 1999 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
facsimile. 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 26, 1999 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 25,000,000 shares of common stock, $.10 par value
(the "Common Stock"), authorized, of which 5,577,620 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
February 1, 1999. 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
National City Bank 574,459 (1) 10.30
Suite 690 S
101 W. Washington Street
Indianapolis, IN 46204-3405
Patricia Schaefer 481,021 (2) 8.61
5400 Deer Run Court
Muncie, IN 47304
Diane D. Humphrey 462,021 8.29
2279 East 250 North Road
Bluffton, IN 46714
Marvin C. Schwartz 401,546 (3) 7.20
c/o Neuberger & Berman
605 Third Avenue
New York, NY 10158
William H. Lawson 377,313 (4) 6.48
400 East Spring Street
Bluffton, IN 46714
Norwest Bank Minnesota, N.A. 373,515 (5) 6.70
Midwest Plaza, West Tower
Suite 700
801 Nicolette Mall
Minneapolis, MN 55479-0065
<PAGE>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Ruane, Cunniff & Co., Inc. 309,689 (6) 5.55
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 shares held in the ESOP
and 401(k) plan 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.
(2) Includes 10,000 shares issuable pursuant to stock options exercisable
within 60 days after February 1, 1999.
(3) 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. As a result, the company believes that Mr.
Schwartz beneficially owns 401,546 shares of the Company's Common Stock
of which he has sole investment and sole voting power with respect to
316,160 shares, shared investment power with respect to 85,386 shares
and no shared voting power.
(4) Includes 244,180 shares issuable pursuant to stock options exercisable
within 60 days after February 1, 1999. Mr. Lawson has no investment
power with respect to 1,629 of these shares.
(5) Norwest Bank Minnesota, N.A. 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. Norwest Bank does not have investment power over any of
these shares.
(6) According to a Schedule 13G filed with the SEC on February 13, 1998,
Ruane, Cunniff & Co., Inc. has sole investment power with respect to
309,689 shares, sole voting power with respect to 79,625 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 February 1, 1999. 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 481,021(1) 8.61
William H. Lawson 377,313(1) (2) 6.48
John B. Lindsay 196,297(1) (2) 3.51
William J. Foreman 45,620(1) (2) *
Donald J. Schneider 39,373(1) *
Donald R. Hobbs 31,638(1) (2) *
Jess B. Ford 30,369(1) (2) *
Kirk M. Nevins 26,760(1) (2) *
Thomas A. Miller 24,440(1) (2) *
Robert H. Little 14,002(1) *
Juris Vikmanis 11,000(1) *
Howard B. Witt 5,200(1) *
Jerome D. Brady 0 *
R. Scott Trumbull 0 *
All directors and 1,283,033(1) (2) 21.43
executive officers as
a group (14 persons)
* Less than 1 percent of class
(1) Includes shares issuable pursuant to stock options exercisable within 60
days after February 1, 1999 as follows: Ms. Schaefer, 10,000 shares; Mr.
Lawson, 244,180 shares; Mr. Lindsay, 25,000 shares; Mr. Foreman, 30,000
shares; Mr. Schneider, 9,000 shares; Mr. Hobbs, 24,000 shares; Mr.
Ford, 30,000 shares; Mr. Nevins, 14,000 shares; Mr. Miller, 8,600 shares;
Mr. Little, 7,000 shares; Mr. Vikmanis, 6,000 shares; Mr. Witt, 5,000
shares; and all directors and executive officers as a group, 412,780
shares.
(2) Includes shares held by the ESOP Trustee as to which the individuals do
not have investment power as follows: Mr. Lawson, 1,629; Mr. Lindsay,
1,038; Mr. Foreman, 1,158; Mr. Hobbs, 1,004; Mr. Ford, 211; Mr. Nevins,
1,128; Mr. Miller, 895; and all directors and executive officers as a
group, 7,063.
<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 written representations that no other
reports were required to be filed, the Company believes that its directors,
officers and greater than 10 percent shareholders complied with all applicable
Section 16(a) filing requirements applicable to them during 1998, except that
Messrs. Jerome D. Brady and R. Scott Trumbull inadvertently filed late Form 3
filings with their appointment as directors of the Company.
ELECTION OF DIRECTORS
The Company's Board of Directors consists of nine directors divided into
three classes of 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.
John B. Lindsay, Juris Vikmanis and Howard B. Witt have been nominated to
serve as directors of the Company. Mr. Lindsay, Mr. Vikmanis and Mr. Witt are
currently directors of the Company. All three nominees have 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 2002
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
John B. Lindsay, 56 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, 61 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, 58 Chairman of the Board, President 1994
Director of the Company and Chief Executive Officer,
Littelfuse, Inc.; a
manufacturer of electronic,
electrical and automotive fuses.
Director, Artisan Funds, Inc.
CONTINUING DIRECTORS
- --------------------
DIRECTORS WHOSE TERMS EXPIRE IN 2000
DIRECTOR
NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE
Jerome D. Brady, 57 President & Chief Executive Appointed to
Director of the Company Officer of C&K Components the Board by the
since 1997, a manufacturer Directors in
of electro-mechanical switches. 1998
Formerly Chairman, President
and Chief Executive Officer
of AM International from
1994-1997; prior thereto,
Vice President & General
Manager of FMC, Food Machinery
Group 1992-1994.
Robert H. Little, 63 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.
<PAGE>
Patricia Schaefer, 68 Retired; Director Muncie Public 1982
Director of the Company Library; Muncie, Indiana.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
William H. Lawson, 62 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, 63 President of Schneider National 1988
Director of the Company Inc., an asset based logistics
company. Director of Green Bay
Packers and St. Norbert College.
R. Scott Trumbull, 50 Exec. Vice President Appointed to
Director of the Company International Operations & the Board by the
Corporate Development, Directors in
Owens-Illinois since August, 1998
1998; prior to August, Vice
President International
Operations,Owens-Illinois,
a manufacturer of glass &
plastic packaging.
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 1996 Nonemployee Director Stock
Option Plan (the "1996 Director Plan"). This Plan 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 17, 1998, Donald J. Schneider received upon his re-election to the
Board at the 1998 Annual Meeting an option to purchase 3,000 shares at an
exercise price of $70.50 per share.
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. The consulting director can receive this fee up to the same
number of years that were served as director. During 1998, Mr. Kraus, Dr. N.
A. Lamberti, Mr. William W. Keefer and Mr. Gerard E. Veneman, who retired in
1985, 1988, 1996 and 1998, with 29, 19, 28 and 29 years of service,
respectively, participated in this Plan. Messrs. Kraus and Lamberti each
received an annual fee of $15,000 in 1998. Mr. Keefer received an annual fee
of $20,000 in 1998, and Mr. Veneman received a fee of $5,000 in 1998.
<PAGE>
The Board held five (5) regularly scheduled meetings during 1998 and no
special meetings. Each director attended 100 percent of the aggregate
meetings of the Board and Board committees of which he or she was a member
except for Mr. Veneman. Mr. Veneman retired from the Board in 1998.
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 1998.
PERSONNEL AND COMPENSATION COMMITTEE. Members of the Personnel and
Compensation Committee (the "Compensation Committee") currently are Donald J.
Schneider (Chairman),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 1998.
<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 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, including the Chief Executive Officer, 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 fixed a benchmark to determine the level, if
any, of the annual incentive cash bonus to be paid. The benchmark used was
pre-tax return on assets. Considering this ratio and other qualitative
measures, a bonus percentage of base salary was then determined. The
Committee awarded the Chief Executive Officer an incentive cash bonus of 80
percent of base salary for 1998.
As an additional incentive, the Committee makes grants and awards under
the Company's shareholder-approved stock option 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 1998.
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 1998 and is not expected to have an effect on
compensation payable in 1999.
D. J. Schneider 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), (3) the NASDAQ Non-Financial Stock Index (including
reinvestment of dividends) and (4) the Russell 2000 Stock Index (including
reinvestment of dividends) for the period December 31, 1993 through
December 31, 1998. The Russell 2000 Stock Index was added this year as it
represents the performance of companies with similar market capitalizations as
the Company. In each case, the graph assumes the investment of $100 on
December 31, 1993.
$300
294<F3>
280<F2>
229<F3>
$200 201<F1>
171<F3> 191<F2>
139<F3> 163<F2> 189<F1>
134<F2> 140<F4> 169<F4> 163<F4>
122<F4> 132<F1>
$100 101<F3>
97<F1>
97<F4>
96<F2> 95<F1>
$ 0
1993 1994 1995 1996 1997 1998
YEAR
<F1> FRANKLIN ELECTRIC
<F2> NASDAQ NON-FINANCIAL
<F3> S & P 500
<F4> RUSSELL 2000
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the years
1996 through 1998 for the Company's Chief Executive Officer and the Company's
other executive officers who received compensation in excess of $100,000
during 1998.
<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, 1998 $414,000 $331,000 - $19,415
Chairman of the 1997 414,000 290,000 - 19,548
Board and Chief 1996 383,000 203,000 - 14,465
Executive Officer
John B. Lindsay,<F2> 1998 $270,000 $216,000 - $ 6,574
President 1997 270,000 189,000 - 15,229
1996 239,500 148,000 - 5,250
Jess B. Ford 1998 $175,000 $140,000 - $ 5,600
Vice President and 1997 175,000 123,000 - 5,600
Chief Financial 1996 160,000 99,000 15,000 5,250
Officer
William J. Foreman,<F2> 1998 $135,000 $108,000 - $ 5,977
Vice President 1997 135,000 95,000 - 5,744
1996 125,000 77,000 - 5,250
Donald R. Hobbs, 1998 $135,000 $108,000 - $ 6,548
Vice President, 1997 135,000 95,000 - 5,250
Submersible Motor 1996 115,104 71,000 10,000 5,250
Marketing
Kirk M. Nevins,<F2> 1998 $135,000 $108,000 - $ 6,861
Vice President, 1997 135,000 95,000 - 5,600
Sales 1996 125,000 77,000 10,000 7,654
Thomas A. Miller,<F3> 1998 $128,336 $103,000 - $ 5,600
Vice President
Submersible Engineering
<FN>
<F1> All Other Compensation for 1998 reflects (i) Company matching
contributions to defined contribution plans for each executive officer
in the amount of $5,600; (ii) reimbursement of $868, $974, $377, $948
and $1,261 of taxes paid for Mr. Lawson, Mr. Lindsay, Mr. Foreman, Mr.
Hobbs, and Mr. Nevins respectively; (iii) 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> Messrs. Lindsay, Foreman and Nevins received restricted stock awards in
1994 of 20,000, 7,000 and 5,000 shares, respectively, under the 1988
Stock Incentive Award Plan. During the restriction period, dividends on
these shares are paid to the recipient. The January 2, 1999 market value
of these shares were $1,350,000, $472,500 and $337,500, respectively.
<F3> Mr. Miller was elected an executive officer of the Company in April,
1998.
</FN>
</TABLE>
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Fiscal Fiscal
on Value Year-End (#) Year-End($)
Exercise Realized(1) Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable(2)
- ---- -------- ----------- ------------- ----------------
William H. Lawson 65,396 $3,889,717 244,180/0 $10,724,643/$0
John B. Lindsay 25,000 $1,043,750 25,000/0 $1,025,000/$0
Jess B. Ford - - 30,000/15,000 $1,005,000/$442,500
William J. Foreman - - 30,000/0 $1,408,750/$0
Donald R. Hobbs - - 24,000/6,000 $1,100,750/$153,000
Kirk M. Nevins - - 14,000/6,000 $512,000/$153,000
Thomas A. Miller - - 8,600/0 $352,600/$0
(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
$67 1/2 on January 2, 1999 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 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 $ 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
650,000 227,500 260,000 292,500 325,000 325,000 342,100
700,000 245,000 280,000 315,000 350,000 350,000 366,600
Estimated years of service for the named executive officers eligible to
receive the foregoing pension amounts are as follows: Mr. Lawson, 13 years;
Mr. Lindsay, 21 years; Mr. Ford, 3 years; Mr. Foreman, 29 years; Mr. Hobbs, 14
years; Mr. Nevins, 26 years; Mr. Miller, 26 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.
In 1998, Mr. Lindsay paid off a non-recourse, non-interest bearing
promissory note in the amount of $352,000 borrowed in connection with a stock
purchase under the Company's 1988 Executive Stock Purchase Plan. The largest
amount outstanding on this note in 1998 was $352,000.
APPROVAL OF AMENDMENTS TO THE RESTATED
CERTIFICATE OF INCORPORATION WITH RESPECT TO PREFERRED STOCK
At its meeting on February 12, 1999, the Board of Directors unanimously
adopted, subject to shareholder approval, amendments to the Company's Restated
Certificate of Incorporation (the "Restated Certificate of Incorporation") to
(i) delete all references to Class A Cumulative Preferred Stock, Class B
Cumulative Preferred Stock and Class C Cumulative Preferred Stock in the
Restated Certificate of Incorporation (the "Old Preferred Stock") and (ii)
create a new class of preferred stock consisting of 5,000,000 shares (the "New
Preferred Stock").
The purpose of deleting all references to the Old Preferred Stock is to
reflect the fact that nearly all authorized shares of that stock have been
issued and bought back by the Company and, pursuant to the terms of each
class, may not be reissued.
Upon the adoption of the proposed amendment to authorize the New
Preferred Stock, the Board of Directors, without further action or vote by the
shareholders, will have the authority to issue up to 5,000,000 shares of New
Preferred Stock in one or more classes or series and to fix the rights and
preferences of each such class or series, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
class or series, or the designations of such class or series. The Company has
no present commitments, arrangements or plans to issue any New Preferred
Stock. Nevertheless, all of the New Preferred Stock may be issued by the
Company at such time, to such persons and for such consideration upon
authorization of the Board of Directors without further action by the
shareholders unless otherwise required by applicable law.
The Board of Directors believes that the proposed creation of the New
Preferred Stock is in the best interests of the shareholders. The Board of
<PAGE>
Directors believes that the Company should have maximum flexibility in
connection with the sale of securities to raise additional working capital,
the negotiation of mergers and acquisitions and other proper business
purposes. In many situations prompt action may be required which would not
permit seeking shareholder approval to authorize additional shares for a
specific transaction or purpose on a timely basis. The Board of Directors
believes it is important to have the flexibility to act promptly in the best
interests of shareholders.
The voting and other rights of the holders of the Common Stock may be
subject to and adversely affected by, the rights of any New Preferred Stock
that may be issued in the future, including dilution of the ownership of
current shareholders. In addition, the issuance of New Preferred Stock could
have potential anti-takeover effects in that the shares could be used to issue
control blocks to persons or entities considered favorable by management
shareholders, thereby rendering an unfriendly tender-offer, proxy contest or
merger more difficult. The existence of the authorized but unissued shares of
New Preferred Stock, and the Board of Directors' ability to issue such shares
and set its terms without shareholder approval, may deter persons from seeking
to acquire the Company on a hostile basis and could make any attempt at
gaining control of the Company or changing management of the Company more
difficult or time consuming. The purpose of the Board in seeking the creation
of the New Preferred Stock is not for anti-takeover purposes.
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
<PAGE>
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
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 foregoing summary description of the proposed amendments is not
intended to be complete and is qualified in its entirety by reference to the
complete text of Article V and VI of the Restated Certificate of
Incorporation, which is attached as Exhibit A to this Proxy Statement.
The affirmative vote of the holders of a majority of the votes cast is
required to approve the amendments to the Restated Certificate of
Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION WITH RESPECT TO
PREFERRED STOCK.
<PAGE>
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 1999 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 5, 1999 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 inclusion in the Company's proxy statement for the 2000
Annual Meeting. Also, other proposals intended to be presented at the next
Annual Meeting but not included in the Company's proxy statement must be
received by the Company no later than January 16, 2000 to be considered for
presentation at that meeting.
OTHER BUSINESS
Management has no knowledge of any other matters to be presented for
action by the shareholders at the 1999 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 5, 1999
Dean W. Pfister, Secretary
<PAGE>
EXHIBIT A
RESTATED ARTICLES V AND VI
TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
ARTICLE V
AMOUNT OF CAPITAL STOCK
The total number of shares into which the authorized capital stock of the
Corporation is divided is 30,100,000 shares, consisting of 5,100,000 shares
without par value and 25,000,000 shares with par value of $.10 per share.
ARTICLE VI
TERMS OF CAPITAL STOCK
The shares of authorized capital stock are divided into classes as follows:
1. 100,000 shares of Preference Stock, without par value (hereinafter
sometimes referred to as "Preference Stock");
2. 5,000,000 shares of Preferred Stock, without par value
(hereinafter sometimes referred to as "Preferred Stock"); and
3. 25,000,000 shares of Common Stock, par value $.10 per share
(hereinafter sometimes referred to as "Common Stock").
The preferences, limitations and relative rights of each class are as follows:
A. Preference Stock.
Shares of Preference Stock may be issued from time to time in one or
more series, in such amounts and for such consideration as the Board of
Directors may determine and with such preferences, limitations and relative
rights as shall be determined and stated by the Board of Directors. Such
preferences, limitations and relative rights shall be determined and stated
for each such series of Preference Stock by resolution of the Board of
Directors prior to the issuance of each of such series, which resolution shall
authorize the issuance of such series and the authority for which is hereby
granted to the Board of Directors of the Corporation. Without limiting the
generality of the authority granted to the Board of Directors herein, the
Board of Directors shall have the power, right and authority to determine the
following preferences, limitations and relative rights:
(1) Designation. The designation of each series, which designation
shall be by distinguishing letter, number, title or combination thereof.
(2) Number. The number of shares of any series to be issued.
(3) Dividend Source, Rate and Dates. The source, rate and dates of any
dividends payable with respect to shares of any series; provided, however,
that no dividends shall be payable upon the shares of Preference Stock to the
extent that (i) the Corporation would not be able to pay its debts as they
become due in the usual course of business; or (ii) the Corporation's total
assets would be less than the sum of its total liabilities plus (unless
otherwise provided in these Articles of Incorporation) the amount that would
<PAGE>
be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of the
shareholders whose preferential rights are superior to those receiving the
distribution.
(4) Dividend Accumulations. Whether any dividends which may be payable
with respect to shares of any series shall be cumulative; and, if they shall
be cumulative, then the dates from which such dividends shall start to
cumulate.
(5) Dividend Preferences. The preference or preferences, if any, to be
accorded dividends payable with respect to shares of any series.
(6) Redemption. The redemption rights and prices, if any, with respect
to shares of any series.
(7) Sinking Fund. The terms and amount of any sinking fund provided
for the redemption of shares of any series.
(8) Rights of Purchase. The rights, if any, of the Corporation to
purchase for retirement, other than by way of redemption, shares of any
series, and the terms and conditions of any such purchase rights.
(9) Conversion. Whether or not the shares of any series shall be
convertible into Common Stock or into shares of stock of any other series or
number of series or into any other security; and, if so, the conversion price
or prices, any adjustments thereof and/or any other terms and conditions upon
which such conversion may be effected.
(10) Liquidation. The preference or preferences, if any, with respect
to shares of any series entitled to receive the net assets of the Corporation
upon liquidation, dissolution or winding up of the Corporation.
(11) Voting. The voting rights, if any, to which the holders of the
shares of Preference Stock may be entitled.
B. Series I Junior Participating Preference Stock.
This Section B of this Article VI hereby creates a series of Preference
Stock and hereby states the designation and number of shares, and fixes the
relative powers, preferences and rights of such series.
(1) Designation and Amount. The shares of such series shall be
designated as "Series I Junior Participating Preference Stock" (the "Series I
Preference Stock") and the number of shares constituting the Series I
Preference Stock shall be 100,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; PROVIDED, that no decrease
shall reduce the number of Series I Preference Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series I Preference Stock.
(2) Dividend Rights. Subject to the rights of the holders of any
shares of any series of Preference Stock (or any similar shares) ranking prior
and superior to the Series I Preference Stock with respect to dividends, the
holders of Series I Preference Stock, in preference to the holders of Common
Stock and of any other junior stock, shall be entitled to receive, when, as
<PAGE>
and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the fifteenth day of
February, May, August and November in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series I Preference Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (i) $16.00 or (ii)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in Common Stock or a subdivision
of the outstanding Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any Series I Preference Stock or fraction of a Series I
Preference Stock. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in Common Stock, or effect a
subdivision or combination or consolidation of the outstanding Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of Series I Preference Stock were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
The Corporation shall declare a dividend or distribution on the Series I
Preference Stock as provided in this paragraph 2 immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable
in Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $16.00 per share on the Series I Preference Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
Dividends shall begin to accrue and be cumulative on outstanding Series
I Preference Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of Series
I Preference Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid
on the Series I Preference Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of Series I Preference Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the payment
thereof.
(3) Redemption. The Series I Preference Stock shall not be redeemable.
<PAGE>
(4) Conversion. The Series I Preference Stock shall not be convertible
into Common Stock or shares of any other series of any other class of
preferred stock of the Corporation ("Preferred Stock") or Preference Stock
unless the terms of any such series provide otherwise.
(5) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made, (i) to the holders of stock ranking junior (either as to
dividends or upon liquidation) to the holders of Series I Preference Stock
unless, prior thereto, the holders of Series I Preference Stock shall have
received from the assets of the Corporation a preferential amount equal to
$5,000 per share plus all accrued and unpaid dividends thereon, whether or not
declared, to the date of payment, provided that the holders of Series I
Preference Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock, or (ii) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series I
Preference Stock, except distributions made ratably on the Series I Preference
Stock and all such parity stock in proportion to the total amounts to which
the holders of all such stock are entitled upon such liquidation, dissolution
or winding up. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in Common Stock, or effect a
subdivision or combination or consolidation of the outstanding Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of Series I Preference Stock
were entitled immediately prior to such event under the proviso in clause (i)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(6) Voting. Except as provided herein or as may be required by law,
holders of Series I Preference Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any
corporate action.
In addition to any other voting rights as a separate class or otherwise
to which the holders of Series I Preference Stock may be entitled by law and
subject to the provision for adjustment hereinafter set forth, each share of
Series I Preference Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the shareholders of the Corporation. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in Common Stock, or effect a subdivision or combination
or consolidation of the outstanding Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the number of
votes per share to which holders of Series I Preference Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
<PAGE>
Except as otherwise provided herein, in any other provisions of the
Restated Articles of Incorporation of the Corporation creating a series of
Preferred Stock or Preference Stock or any similar stock, or by law, the
holders of Series I Preference Stock and the holders of Common Stock and any
other capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders of
the Corporation.
If at the time of any annual meeting of shareholders for the election of
directors a "default in preference dividends," (as that term is hereinafter
defined), on the Series I Preference Stock shall exist, the number of
directors constituting the Board of Directors of the Company shall be
increased by two (2), and the holders of the Series I Preference Stock and any
other series of Preference Stock (whether or not the holders of such stock
would be entitled to vote for the election of directors if such default in
preference dividends did not exist) shall have the right at such meeting,
voting together as a single class without regard to series, to the exclusion
of the holders of Common Stock, to elect two (2) directors of the Company to
fill such newly created directorships. Such right shall continue until there
are no dividends in arrears upon the Series I Preference Stock. Each director
elected by the holders of Series I Preference Stock and any other series of
Preference Stock (a "Preferred Director") shall continue to serve as such
director for the full term for which he shall have been elected,
notwithstanding that prior to the end of such term a default in preference
dividends shall cease to exist. Any Preferred Director may be removed by, and
shall not be removed except by, the vote of the holders of record of the
outstanding Series I Preference Stock and any other series of Preference Stock
voting together as a single class without regard to series, at a meeting of
the shareholders or of the holders of Series I Preference Stock and any other
series of Preference Stock called for the purpose. So long as a default in any
preference dividends on the Series I Preference Stock shall exist, (i) any
vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by
the remaining Preferred Director and filed with the Company and (ii) in the
case of the removal of any Preferred Director, the vacancy may be filled by
the vote of the holders of the outstanding Series I Preference Stock and any
other series of Preference Stock voting together as a single class without
regard to series, at the same meeting at which such removal shall be voted.
Each director appointed as aforesaid by the remaining Preferred Director shall
be deemed, for all purposes hereof, to be a Preferred Director. Whenever the
term of office of the Preferred Directors shall end and a default in
preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Company shall be reduced by two
(2). For the purposes hereof, a "default in preference dividends" on the
Series I Preference Stock shall be deemed to have occurred whenever the amount
of accrued dividends upon any series of the Series I Preference Stock shall be
equivalent to six (6) full quarterly dividends or more, and, having so
occurred, such default shall be deemed to exist thereafter until, but only
until, all accrued dividends on all Series I Preference Stock of each and
every series then outstanding shall have been paid to the end of the last
preceding quarterly dividend period.
(7) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series I Preference Stock as provided in paragraph 2 of this
Section B are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on Series I Preference
Stock outstanding shall have been paid in full, the Corporation shall not:
<PAGE>
(i) declare or pay dividends, or make any other distributions, on any
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series I Preference Stock;
(ii) declare or pay dividends, or make any other distributions, on any
stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series I Preference
Stock, except dividends paid ratably on the Series I Preference
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of
all such stock are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration any stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series I Preference Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
any shares of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series I
Preference Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any Series
I Preference Stock, or any stock ranking on a parity with the Series
I Preference Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of
Directors) to all holders of such stock upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any stock of the
Corporation unless the Corporation could, under paragraph 7(a) of this Section
B, purchase or otherwise acquire such stock at such time and in such manner.
(8) Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
Common Stock is exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series I
Preference Stock shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event
the Corporation shall at any time declare or pay any dividend on the Common
Stock payable in Common Stock, or effect a subdivision or combination or
consolidation of the outstanding Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of
Series I Preference Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
<PAGE>
(9) Priorities. So long as any Series I Preference Stock remains
outstanding, the Corporation shall not, without the affirmative vote or
written consent of the holders of at least two-thirds of the outstanding
Series I Preference Stock, voting together as a single class, amend, alter or
repeal any of the provisions of these Restated Articles of Incorporation so as
adversely to affect the preferences, limitations and relative rights of Series
I Preference Stock. So long as any Series I Preference Stock remains
outstanding, Series I Preference Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to any other series of any
other class of Preference Stock, unless the terms of any such series shall
provide otherwise.
(10) Status of Reacquired Shares. The Corporation shall retire and
cancel any shares of Series I Preference Stock that it redeems, purchases or
otherwise acquires. All such shares shall upon their cancellation become
authorized but unissued shares of Preference Stock and may be reissued as part
of a new series of Preference Stock subject to the conditions and restrictions
on issuance set forth in the restated Articles of Incorporation creating a
series of Preference Stock or as otherwise required by law.
C. Preferred Stock.
Preferred Stock may be issued from time to time in one or more series as
may from time to time be determined by the Board of Directors. Each series
shall be distinctly designated. All shares of any one series of the Preferred
Stock shall be alike in every particular, except that there may be different
dates from which dividends thereon, if any, shall be cumulative, if made
cumulative. The powers, preferences and relative, participating, optional and
other rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any other series at any
time outstanding. Subject to the provisions of Section D of this ARTICLE VI,
the Board of Directors is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of each
particular series of Preferred Stock, the designation, powers, preferences and
relative, participating, optional and other rights, and the qualifications,
limitations and restrictions thereof, if any, of such series, including, but
without limiting the generality of the foregoing, the following:
(a) the distinctive designation of, and the number of Preferred Stock
which shall constitute the series, which number may be increased
(except as otherwise fixed by the Board of Directors) or decreased
(but not below the number of shares thereof then outstanding) from
time to time by action of the Board of Directors;
(b) the rate and times at which, and the terms and conditions upon
which, dividends, if any, on shares of the series shall be paid,
the extent of preferences or relation, if any, of such dividends
to the dividends payable on any other class or classes of shares
of the Corporation, or on any series of Preferred Stock or of any
other class or classes of shares of the Corporation and whether
such dividends shall be cumulative or non-cumulative;
(c) the right, if any, of the holders of shares of the series to
convert the same into, or exchange the same for, shares of any
other class or classes of shares of the Corporation, or of any
series of Preferred Stock, and the terms and conditions of such
conversion or exchange;
<PAGE>
(d) whether shares of the series shall be subject to a redemption
price or prices including, without limitation, a redemption price
or prices payable in Common Stock and the time or times at which,
and the terms and conditions upon which shares of the series may
be redeemed;
(e) the rights, if any, of the holders of shares of the series upon
voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
Corporation;
(f) the terms of the sinking fund or redemption or purchase account,
if any, to be provided for shares of the series; and
(g) the voting powers, if any, of the holders of shares of the series
which may, without limiting the generality of the foregoing,
include (i) the right to more or less than one vote per share on
any or all matters voted upon by the shareholders and (ii) the
right to vote, as a series by itself or together with other series
of Preferred Stock or together with all series of Preferred Stock
as a class, upon such matters, under such circumstances and upon
such conditions as the Board of Directors may fix, including,
without limitation, the right, voting as a series by itself or
together with other series of Preferred Stock or together with all
series of Preferred Stock as a class, to elect one or more
directors of this Corporation in the event there shall have been a
default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and upon such
conditions as the Board of Directors may determine.
No holder of any share of any series of Preferred Stock shall be
entitled to vote for the election of directors or in respect of any other
matter except as may be required by the Indiana Business Corporation Law, as
amended, or as is permitted by the resolution or resolutions adopted by the
Board of Directors authorizing the issue of such series of Preferred Stock.
D. Common Stock.
1. Dividend Rights. Subject to the rights of all stock of the
Corporation ranking, as to dividends, senior to Common Stock, the holders of
Common Stock shall be entitled to receive such dividends, if any, as may be
declared by the Board of Directors of the Corporation from time to time and
paid on Common Stock out of any assets of the Corporation at the time legally
available for the payment of dividends.
2. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of the
shares of the Common Stock shall be entitled to share ratably in the assets of
the Corporation remaining after all distributions or payments shall have been
made to the holders of any class of stock (or series thereof) of the
Corporation ranking senior, as to liquidation rights, to Common Stock.
The merger or share exchange of the Corporation with any other
corporation, or a sale, lease or conveyance of all or substantially all of its
assets, shall not be regarded as a liquidation, dissolution or winding up of
the Corporation within the meaning of this section.
3. Voting. Except as provided herein or as may be required by law, all
voting power shall vest exclusively in the holders of shares of Common
<PAGE>
Stock. Each share of Common Stock shall be entitled to one vote on each matter
submitted to a vote of the shareholders of the Corporation.
E. Distributions to Shareholders.
The Board of Directors may authorize and the Corporation may make
distributions to its shareholders if, after giving the distribution effect,
(a) the Corporation would be able to pay its debts as they become due in the
usual course of business and, (b) the Corporation's total assets would be
greater than its total liabilities, without regard to any amount that would be
needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
<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 posses if personally present, and to vote all
shares of common stock of Franklin Electric Co., Inc. held of record by the
undersigned on February 26, 1999, which the undersigned would be entitled to
vote at the Annual Meeting of Shareholders to be held on April 16, 1999 or any
adjournment or postponement thereof.
1. ELECTION OF DIRECTORS. Proposal to elect John B. Lindsay, Juris Vikmanis
and Howard B. Witt as directors to serve until the 2002 Annual Meeting of
Shareholders,
FOR all nominees[ ] WITHHOLD AUTHORITY to vote for all nominees[ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through the nominee's name in the list below.)
John B. Lindsay Juris Vikmanis Howard B. Witt
2. APPROVAL OF AMENDMENT. Approval of Amendment to the Restated Certificate
of Incorporation.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to ratify the appointment
of Deloitte & Touche LLP as independent auditors for the 1999 fiscal year.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. 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 and 3.
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________________________________, 1999
___________________________________________
Signature
___________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
3
