SHARE-BASED COMPENSATION

Effective May 5, 2017, the shareholders of the Company approved the Franklin Electric Co., Inc. 2017 Stock Plan (the "2017 Stock Plan"). The Board of Directors had previously approved the 2017 Stock Plan on March 15, 2017 subject to shareholder approval. The 2017 Stock Plan was enacted in addition to the previously approved 2009 and 2012 Stock Plans and is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, stock unit awards, and stock appreciation rights ("SARs") to key employees and non-employee directors. The number of shares that may be issued under the Plan is 1,400,000. Stock options and SARs reduce the number of available shares by one share for each share subject to the option or SAR, and stock awards and stock unit awards settled in shares reduce the number of available shares by 1.5 shares for every one share delivered.

The Company also maintains the Franklin Electric Co., Inc. 2012 Stock Plan (the "2012 Stock Plan"), which is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, and stock unit awards to key employees and non-employee directors.

The 2012 Stock Plan authorized 2,400,000 shares for issuance as follows:



2012 Stock Plan		Authorized Shares
Stock Options		1,680,000
Stock/Stock Unit Awards		720,000

The Company also maintains the Amended and Restated Franklin Electric Co., Inc. Stock Plan (the "2009 Stock Plan") which, as amended in 2009, provided for discretionary grants of stock options and stock awards. The 2009 Stock Plan authorized 4,400,000 shares for issuance as follows:



2009 Stock Plan	Authorized Shares
Stock Options	3,200,000
Stock Awards	1,200,000

All options in the 2009 Stock Plan have been awarded.

The Company currently issues new shares from its common stock balance to satisfy option exercises and the settlement of stock awards and stock unit awards made under the outstanding stock plans.

Stock Options:

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model with a single approach and amortized using a straight-line attribution method over the option’s vesting period.

The assumptions used for the Black-Scholes model to determine the fair value of options granted during the nine months ended September 30, 2017 and October 1, 2016 are as follows:



	September 30, 2017		October 1, 2016
Risk-free interest rate	1.89	%	1.21	%
Dividend yield	0.94	%	1.32	%
Volatility factor	31.19	%	37.70	%
Expected term	5.5 years		5.5 years

A summary of the Company’s outstanding stock option activity and related information for the nine months ended September 30, 2017 is as follows:



(Shares in thousands)	September 30, 2017
Stock Options	Shares		Weighted-Average Exercise Price
Outstanding at beginning of period	1,455		$	25.02
Granted	192		42.49
Exercised	(208	)	18.11
Forfeited	(2	)	35.99
Outstanding at end of period	1,437		$	28.34
Expected to vest after applying forfeiture rate	1,415		$	28.21
Vested and exercisable at end of period	951		$	24.24

A summary of the weighted-average remaining contractual term and aggregate intrinsic value as of September 30, 2017 is as follows:



	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (000's)
Outstanding at end of period	5.68 years	$	23,722
Expected to vest after applying forfeiture rate	5.64 years	$	23,549
Vested and exercisable at end of period	4.23 years	$	19,594

The total intrinsic value of options exercised during the nine months ended September 30, 2017 and October 1, 2016 was $4.8 million and $3.0 million, respectively.

As of September 30, 2017, there was $1.9 million of total unrecognized compensation cost related to non-vested stock options granted under the 2012 Stock Plan and the 2009 Stock Plan. That cost is expected to be recognized over a weighted-average period of 1.98 years.

Stock/Stock Unit Awards:

A summary of the Company’s restricted stock/stock unit award activity and related information for the nine months ended September 30, 2017 is as follows:



(Shares in thousands)	September 30, 2017
Restricted Stock/Stock Unit Awards	Shares		Weighted-Average Grant- Date Fair Value
Non-vested at beginning of period	473		$	34.89
Awarded	136		42.23
Vested	(109	)	35.81
Forfeited	(37	)	36.51
Non-vested at end of period	463		$	36.71

As of September 30, 2017, there was $10.2 million of total unrecognized compensation cost related to non-vested restricted stock/stock unit awards granted under the 2012 Stock Plan and the 2009 Stock Plan. That cost is expected to be recognized over a weighted-average period of 2.30 years.