-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GCnqurbafXk+Ja8gYHPd0V+Yaie6CqE+L1I2Brcqf6v/y7oj9VBbTsMh5Ag+LiPp bQ/JBBovXgbX3jc+q3GvWA== 0000038725-97-000009.txt : 19970307 0000038725-97-000009.hdr.sgml : 19970307 ACCESSION NUMBER: 0000038725-97-000009 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970411 FILED AS OF DATE: 19970306 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN ELECTRIC CO INC CENTRAL INDEX KEY: 0000038725 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 350827455 STATE OF INCORPORATION: IN FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-00362 FILM NUMBER: 97551684 BUSINESS ADDRESS: STREET 1: 400 E SPRING ST CITY: BLUFFTON STATE: IN ZIP: 46714 BUSINESS PHONE: 2198242900 MAIL ADDRESS: STREET 1: 400 E SPRING STREET CITY: BLUFFTON STATE: IN ZIP: 46714 DEF 14A 1 PROXY STATEMENT 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: ----------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ----------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ----------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ----------------------------------------------------------------------- (5) Total fee paid: ----------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ----------------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: ----------------------------------------------------------------------- 3) Filing Party: ----------------------------------------------------------------------- 4) Date Filed: ----------------------------------------------------------------------- FRANKLIN ELECTRIC 400 East Spring Street Bluffton, Indiana 46714 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held April 11, 1997 at 10:00 A.M., E.S.T. To the Holders of Shares of Common Stock of Franklin Electric Co., Inc. THE ANNUAL MEETING OF SHAREHOLDERS (THE "ANNUAL MEETING") OF FRANKLIN ELECTRIC CO., INC. (THE "COMPANY"), AN INDIANA CORPORATION, WILL BE HELD AT THE PRINCIPAL OFFICE OF THE COMPANY, 400 EAST SPRING STREET, BLUFFTON, INDIANA, ON FRIDAY, APRIL 11, 1997, AT 10:00 A.M., E.S.T., FOR THE FOLLOWING PURPOSES: 1. To elect three directors for terms expiring at the 2000 Annual Meeting of Shareholders; 2. To ratify the appointment of Deloitte & Touche LLP as independent auditors for the 1997 fiscal year; and 3. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. Only shareholders of record at the close of business on February 28, 1997 will be entitled to notice of and to vote at the Annual Meeting. You are urged to sign and return the enclosed proxy in the envelope provided, whether or not you plan to attend the Annual Meeting. If you do attend, you may nevertheless vote in person which will revoke any previously executed proxy. By order of the Board of Directors. DEAN W. PFISTER Dean W. Pfister, Secretary Bluffton, Indiana March 7, 1997 FRANKLIN ELECTRIC CO., INC. 400 EAST SPRING STREET BLUFFTON, INDIANA 46714 ------------------------------ PROXY STATEMENT ------------------------------ ANNUAL MEETING OF SHAREHOLDERS APRIL 11, 1997 GENERAL INFORMATION This Proxy Statement (the "Proxy Statement") and the enclosed proxy are furnished to shareholders in connection with the solicitation of proxies by the Board of Directors of Franklin Electric Co., Inc. (the "Company"), 400 East Spring Street, Bluffton, Indiana, for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on April 11, 1997 or any adjournment or postponement thereof. This Proxy Statement, together with the Company's Annual Report to shareholders, including financial statements contained therein, is being mailed to shareholders on or about March 7, 1997. Neither the Annual Report nor the financial statements contained therein are to be considered part of this soliciting material. Shareholders are asked to sign and return the enclosed proxy, whether or not they plan to attend the Annual Meeting. If the enclosed proxy is properly signed and returned, the shares represented thereby will be voted in the manner specified in the proxy. If the shareholder does not specify the manner in which the proxy shall be voted, the shares represented thereby will be voted FOR the election of the nominees for director as set forth in this Proxy Statement, FOR the ratification of the appointment of Deloitte & Touche LLP as independent auditors, and in accordance with the recommendations of management with respect to other matters that may properly come before the Annual Meeting. A shareholder who has executed a proxy has the power to revoke it at any time before it is voted, by (i) delivering written notice of such revocation to Mr. Dean W. Pfister, Secretary, 400 East Spring Street, Bluffton, Indiana 46714, (ii) executing and delivering a subsequently dated proxy, or (iii) attending the Annual Meeting and voting in person. The expenses of solicitation, including the cost of printing and mailing, will be paid by the Company. Officers and employees of the Company, without additional compensation, may solicit proxies personally, by telephone or by telegram. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries to forward proxy solicitation material to the beneficial owners of shares held of record by such persons, and the Company will reimburse such entities for reasonable out-of-pocket expenses incurred by them in connection therewith. SHAREHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING The Board of Directors of the Company fixed the close of business on February 28, 1997 as the record date (the "Record Date") for determining shareholders entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 10,000,000 shares of Common Stock, $.10 par value (the "Common Stock"), authorized, of which 5,890,929 shares were outstanding. Each share of Common Stock is entitled to one vote on each matter submitted to a vote of the shareholders of the Company. Votes cast by proxy or in person at the Annual Meeting will be tabulated by the inspectors of election appointed for the Annual Meeting and will be counted as present for purposes of determining whether a quorum is present. A majority of the outstanding shares of Common Stock, present in person or represented by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum but will not be counted as votes cast on any matter submitted to shareholders. A "broker non-vote" occurs when a broker holding shares in street name returns an executed proxy indicating that the broker does not have discretionary authority to vote on a matter. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the persons known by the Company to be the beneficial owners of more than 5 percent of the Company's Common Stock as of January 31, 1997. The nature of beneficial ownership is sole voting and investment power, unless otherwise noted. NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS Fort Wayne National Bank 613,374(1) 10.42 110 W. Berry Street Fort Wayne, IN 46801 First Chicago NBD Corporation 521,815(2) 8.87 One First National Plaza Chicago, IL 60670 Patricia Schaefer 479,021(3)(4) 8.13 405 S. Tara Lane Muncie, IN 47304 Marvin C. Schwartz 475,296(3)(5) 8.08 c/o Neuberger & Berman 605 Third Avenue New York, NY 10158 Diane D. Humphrey 462,021(3) 7.85 2434 N. Fairway Lane Bluffton, IN 46714 Ruane, Cunniff & Co., Inc. 356,738(6) 6.06 767 Fifth Avenue, Suite 4701 New York, NY 10153 (1) Fort Wayne National Bank holds these shares as Trustee under the Company's Employee Stock Ownership Plan (the "ESOP") and Directed Investment Salary Plan (the "401(k) Plan"). The 185,657 shares held in the ESOP will be voted pursuant to the direction of the participants to the extent these shares are allocated to participants' accounts. Unallocated shares and shares for which no direction is received from participants will be voted by the Trustee in accordance with the direction of the Employee Benefits Committee of the Company. The Employee Benefits Committee is appointed by the Company's Board of Directors to oversee the Company's employee benefit plans. In the absence of any direction from the Employee Benefits Committee, such shares will be voted by the Trustee in the same proportion that the allocated shares were voted, unless inconsistent with the Trustee's fiduciary obligations. The 427,717 shares held by the 401(k) Plan will be voted in accordance with the direction of the Employee Benefits Committee and, in the absence of any such direction, in the discretion of the Trustee. The Trustee does not have investment power over any of the shares held by the ESOP or the 401(k) Plan. (2) First Chicago NBD Corporation holds 498,515 of these shares as Trustee under the Company's defined benefit pension plans. According to a Schedule 13G filed with the Securities and Exchange Commission (the "SEC") on February 4, 1997, First Chicago NBD Corp. has sole voting power with respect to 23,300 shares, shared voting power with respect to 498,515 shares, sole investment power with respect to 23,300 shares, and no shared investment power. (3) Pursuant to the Company's Board-authorized stock repurchase program, on January 29, 1997 the Company made the following purchases of the Company's Common Stock in privately negotiated transactions at a price of $48 per share: (i) 175,000 shares from Patricia Schaefer (a director of the Company) for a total consideration of $8,400,000; (ii) 175,000 shares from Diane D. Humphrey (a greater than 5% beneficial owner of the Company's Common Stock) for a total consideration of $8,400,000; and (iii) 150,000 shares from Neuberger & Berman on behalf of its various clients, including Marvin C. Schwartz (a greater than 5% beneficial owner of the Company's Common Stock) for a total consideration of $7,200,000. (4) Includes 8,000 shares issuable pursuant to stock options exercisable within 60 days after January 31, 1997. (5) According to a Schedule 13D filed with the SEC on January 13, 1994, Marvin Schwartz beneficially owned 507,160 shares of the Company's Common Stock, of which he had sole investment and sole voting power with respect to 422,570 shares, shared investment power with respect to 84,590 shares and no shared voting power. Subsequent to this Schedule 13D filing, Mr. Schwartz made further purchases and sales of the Company's Common Stock (including the sale to the Company as described in footnote 3). As a result, Mr. Schwartz beneficially owns 475,296 shares of the Company's Common Stock of which he has sole investment and sole voting power with respect to 398,762 shares, shared investment power with respect to 76,534 shares and no shared voting power. (6) According to a Schedule 13G filed with the SEC on February 7, 1997, Ruane Cunniff & Co., Inc. has sole investment power with respect to 356,738 shares, sole voting power with respect to 95,925 shares and no shared voting or investment power. The following table shows the number of shares of Common Stock beneficially owned by directors, nominees, each of the executive officers named in the "Summary Compensation Table" below, and all executive officers and directors as a group, as of January 31, 1997. The nature of beneficial ownership is sole voting and investment power, unless otherwise noted. NAME OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS Patricia Schaefer 479,021(1) 8.13 William H. Lawson 284,078(1)(2)(3) 4.66 John B. Lindsay 202,160(1)(2)(3) 3.42 William J. Foreman 38,617(1)(2)(3) * Donald J. Schneider 35,610(1) * Kirk M. Nevins 25,496(1)(2)(3) * Donald R. Hobbs 21,293(1)(2)(3) * Gerard E. Veneman 10,548(1) * Robert H. Little 10,042(1) * Juris Vikmanis 9,000(1) * Jess B. Ford 6,067(1)(3) * Howard B. Witt 2,200(1) * All directors and 1,124,132(1)(2)(3) 18.13 executive officers as a group (12 persons) * Less than 1 percent of class (1) Includes shares issuable pursuant to stock options exercisable within 60 days after January 31, 1997, as follows: Ms. Schaefer, 8,000 shares; Mr. Lawson, 206,245 shares; Mr. Lindsay, 20,000 shares; Mr. Foreman, 26,880 shares; Mr. Schneider, 7,000 shares; Mr. Nevins, 8,000 shares; Mr. Hobbs, 14,000 shares; Mr. Veneman, 5,000 shares; Mr. Little, 8,000 shares; Mr. Vikmanis, 4,000 shares; Mr. Ford, 6,000 shares; Mr. Witt, 2,000 shares; and all directors and executive officers as a group, 315,125 shares. (2) Includes shares held by the ESOP Trustee as to which the individuals do not have investment power as follows: Mr. Lawson, 1,397; Mr. Lindsay, 1,149; Mr. Foreman, 931; Mr. Nevins, 902; Mr. Hobbs, 779; and all executive officers as a group, 5,158. (3) Includes shares held by the 401(k) Plan Trustee as to which the individuals do not have voting power as follows: Mr. Lawson, 197; Mr. Lindsay, 2,948; Mr. Foreman, 3,806; Mr. Nevins, 7,794; Mr. Hobbs, 2,074; Mr. Ford, 67; and all executive officers as a group, 16,886. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, officers and greater than 10 percent shareholders of a registered class of the Company's equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock of the Company and to furnish the Company with copies of all Section 16(a) reports they file. Based solely on a review of the copies of these reports furnished to the Company and representations that no other reports were required to be filed, the Company believes that during the past fiscal year its directors, officers and greater than 10 percent shareholders complied with all applicable Section 16(a) filing requirements applicable to them during 1996. ELECTION OF DIRECTORS The Company's Board of Directors consists of eight directors divided into three classes of two or three directors each. Each year, the directors of one of the three classes are to be elected to serve terms of three years and until their successors have been elected and qualified. Three directors are to be elected at the Annual Meeting this year. The election of a director requires the affirmative vote of a majority of the shares voted. Robert H. Little, Patricia Schaefer and Gerard E. Veneman have been nominated to serve as directors of the Company. Mr. Little, Ms. Schaefer, and Mr. Veneman are currently directors of the Company. Each nominee has indicated their willingness to serve as a director if elected. If, however, any nominee is unwilling or unable to serve as a director, it is the intention of management to nominate such other person as a director as it may in its discretion determine, in which event the shares represented by the proxies will be voted for such other person. INFORMATION CONCERNING NOMINEES AND DIRECTORS The ages, principal occupations during the past five years and certain other affiliations of the director nominees and the continuing directors, and the years in which they first became directors of the Company, are as follows: NOMINEES FOR TERMS EXPIRING IN 2000 DIRECTOR NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE Robert H. Little, 61 Retired; President, Waddle 1987 Director of the Company Manufacturing Inc., a producer of precision metal fabrications for the electronics and medical device industries. Patricia Schaefer, 66 Retired; Director Muncie Public 1982 Director of the Company Library; Muncie, Indiana. Gerard E. Veneman, 76 Retired; President, Nekoosa 1969 Director of the Company Papers Inc. and Executive Vice President, Great Northern Nekoosa Corp. from 1970 to 1985, producers of paper and paper products. Director, Sentry Insurance a Mutual Company, and WCN Bank Corp. Continuing Directors DIRECTORS WHOSE TERMS EXPIRE IN 1998 DIRECTOR NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE William H. Lawson, 60 Chairman of the Board and 1985 Chairman of the Board Chief Executive Officer of the and Chief Executive Company. Director of Skyline Officer Corporation and Sentry Insurance a Mutual Company. Donald J. Schneider, 61 President of Schneider National 1988 Director of the Company Inc., an asset based logistics company. Director of Green Bay Packers and St. Norbert College. DIRECTORS WHOSE TERMS EXPIRE IN 1999 DIRECTOR NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE John B. Lindsay, 54 President of the Company 1996 President and since October 1995. Executive Director of the Company Vice President of the Company from 1993 to 1995. Vice President from 1986 to April 1993. Director, Old First National Bank. Juris Vikmanis, 59 Retired; Vice President, 1988 Director of the Company Aerospace Operations, Amphenol Corporation from 1992 to 1993, an aerospace company; formerly Corporate Senior Vice President, Square D Company until the sale of that company in 1991; prior thereto, Executive Vice President, Square D Company from 1989 to 1990. Howard B. Witt, 56 Chairman of the Board 1994 Director of the Company since 1993, President and Chief Executive Officer since 1990, Littelfuse, Inc.; a manufacturer of electronic, electrical and automotive fuses. Director, Artisan Fund's Inc. INFORMATION ABOUT THE BOARD AND ITS COMMITTEES Directors who are not employees of the Company are paid an annual director's fee of $20,000 plus a fee of $750 for each regular Board or Board committee meeting attended. Each committee chairman receives an additional annual fee of $1,500. Directors who are employees of the Company receive no additional compensation for serving on the Board or Board committees. Nonemployee directors participate in the 1990 Nonemployee Director Stock Option Plan (the "1990 Director Plan"), which provides for the automatic grant on the date of the Annual Meeting of Shareholders of a nonqualified stock option to purchase 3,000 shares of Common Stock to each nonemployee director who is then elected or re-elected as a director by the shareholders. On April 12, 1996, Juris Vikmanis and Howard B. Witt each received upon their re- election to the Board at the 1996 Annual Meeting an option to purchase 3,000 shares at an exercise price of $37.00 per share under the 1990 Director Plan. Following the option grants at the 1997 Annual Meeting, no further shares will be available for issuance under the 1990 Director Plan, and the 1990 Director Plan will be replaced with the 1996 Nonemployee Director Stock Option Plan (the "1996 Director Plan"). The 1996 Director Plan has 90,000 shares of Common Stock for issuance and is otherwise substantially identical to the 1990 Director Plan. The Company has a Consulting Directors' Plan (the "Plan"), for nonemployee directors who retire from Board service at age 70 or older. Under the Plan, a retiring director may enter into a consulting agreement with the Company under the terms of which the consulting director agrees to be available for consultation from time to time and is entitled to receive an annual fee for such services equal to the director's fee in effect at retirement, for the same number of years of service as director. Currently, Mr. Kraus, Dr. Lamberti and Mr. Keefer, who retired in 1985, 1988 and 1996, with 29, 19 and 28 years of service, respectively, participate in this Plan. Messrs. Kraus and Lamberti each received an annual fee of $15,000 in 1996. Mr. Keefer received an annual fee of $20,000 in 1996. The Board held five (5) regularly scheduled meetings during 1996 and no special meetings. Each director attended 75 percent or more of the aggregate meetings of the Board and Board committees of which he or she was a member. The committees of the Board are: the Audit Committee and the Personnel and Compensation Committee. AUDIT COMMITTEE. Members of the Audit Committee currently are Robert H. Little (Chairman), Patricia Schaefer and Juris Vikmanis. It is the responsibility of the Audit Committee to advise and make recommendations to the Board of Directors in all matters regarding the Company's accounting methods and internal control procedures. Specific duties of the Audit Committee include: (i) the review of the scope of the annual audit by the Company's independent public accountants and the procedures to be employed and estimated compensation to be paid therefor, (ii) the review of the audit results and financial statements with the independent public accountants and the chief financial officer of the Company, (iii) the review of changes in accounting policies having a significant effect on the Company's reports, (iv) the preparation and presentation to the Board of a report summarizing recommendations with respect to retention or discharge of the independent public accountants, (v) the review of letters of recommendation from the independent public accountants and determining that management has adequately considered or implemented, or both, such recommendations, (vi) meeting periodically with the Company's financial staff to assure that the internal auditing staff is able to express its concerns, either directly to the Audit Committee or through the independent public accountants, and to review the scope of the internal accounting and auditing procedures, (vii) the review of the results and administration of the Company's defined benefit and defined contribution plans, (viii) the review of the Company's policies on improper payments and conflicts of interest, and (ix) the review of officer expense reimbursements. The Audit Committee held two (2) meetings in 1996. PERSONNEL AND COMPENSATION COMMITTEE. Members of the Personnel and Compensation Committee (the "Compensation Committee") currently are Gerard E. Veneman (Chairman), William H. Lawson, Donald J. Schneider and Howard B. Witt. The Compensation Committee determines and approves the annual salary, bonus and other benefits of the chief executive officer and the other executive officers and directors of the Company; reviews and submits to the Board of Directors recommendations concerning stock plans; and periodically reviews the Company's policies in the area of management benefits. The Compensation Committee also oversees the Company's management development and organization structure. The Compensation Committee also initiates nominations of directors, submitting recommendations to the Board for approval. Nominations for the election of directors may also be made by any shareholder entitled to vote in the election of directors, provided that written notice of intent to make a nomination is given to the Secretary of the Company not later than ninety (90) days prior to the anniversary date of the immediately preceding Annual Meeting of Shareholders. Such notice shall set forth: (i) information regarding the proposed nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC, and (ii) the consent of such nominee to serve as a director of the Corporation if so elected. The Personnel and Compensation Committee held three (3) meetings in 1996. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION William H. Lawson, the Chief Executive Officer of the Company, is a member of the Compensation Committee. Mr. Lawson does not participate in the determination of his compensation or benefits. COMPENSATION COMMITTEE REPORT It is the philosophy of the Compensation Committee to maintain a compensation program to attract and retain executive officers who can successfully build the Company's long-term strategic capability. The Compensation Committee has retained a compensation consulting firm to provide information on compensation packages of firms of similar size and industries to aid in the design of its package for the Company's executive officers. The Committee encourages superior performance through the use of annual performance targets for the purpose of determining cash bonuses as well as stock incentive vehicles designed to closely align the executive's reward to that of the shareholders. The Chief Executive Officer is a member of the Committee. He does not participate in the Committee's determination of his compensation package. For the Chief Executive Officer, the current compensation package includes a base salary, an annual incentive cash bonus and stock options. The Compensation Committee believes the combined value of base salary plus bonus approximates market value of base salary and bonus provided to similarly situated executives as reflected in published market surveys. The Compensation Committee believes, however, that a significant portion of executive officer compensation should be dependent upon corporate performance. Accordingly, base salaries have been established somewhat below market levels, while a greater than average annual incentive cash bonus may be achieved. The Compensation Committee has set a benchmark to determine the level, if any, of the annual incentive cash bonus to be paid. The benchmark used is pre-tax return on assets. Considering this ratio and other qualitative measures, a bonus percentage of base salary is determined. The Committee awarded the Chief Executive Officer an incentive cash bonus of 53 percent of base salary for 1996. The annual compensation of the other executive officers includes a base salary and an annual incentive cash bonus, determined similarly to that described above for the Chief Executive Officer. The Committee awarded these executive officers an incentive cash bonus of 62 percent of their base salary for 1996. As an additional incentive, the Committee makes grants and awards under the Company's shareholder-approved stock option and restricted stock plans as well as offering officers the opportunity to purchase shares under the shareholder-approved stock purchase plan. The purpose of these plans is to encourage elective stock ownership, offer long-term performance incentive and to more closely align the executive's compensation with the return received by the Company's shareholders. Using information, observations and recommendations on incentive compensation programs provided by an outside consultant, the Committee reviews annually the financial incentives to officers under prior grants and awards and determines whether additional grants or awards are appropriate. In 1996, the Committee made a stock option grant to three executive officers, Mr. Ford, Mr. Hobbs and Mr. Nevins, as a part of their compensation package. Section 162(m) of the Internal Revenue Code, which sets limitations on the deductibility of executive compensation, did not affect compensation paid to any executive officer in 1996 and is not expected to have an effect on compensation payable in 1997. G. E. Veneman D. J. Schneider W. H. Lawson H. B. Witt STOCK PERFORMANCE GRAPH The following graph compares the cumulative total shareholder return on an investment in (1) the Company's Common Stock (including reinvestment of dividends in 1993, 1994, 1995 and 1996 when the Company paid a dividend on its shares), (2) the Standard & Poor's 500 Stock Index (including reinvestment of dividends) and (3) the NASDAQ Non-Financial Stock Index (including reinvestment of dividends) for the period December 31, 1991 through December 31, 1996. In each case, the graph assumes the investment of $100 on December 31, 1991. $300 262 206 $200 198 192 203 188 169 133 126 121 165 109 118 120 $100 108 $0 1991 1992 1993 1994 1995 1996 YEAR FRANKLIN ELECTRIC NASDAQ NON-FINANCIAL S & P 500 SUMMARY COMPENSATION TABLE The following table sets forth compensation information for the years 1994 through 1996 for the Company's Chief Executive Officer and the Company's other executive officers who received compensation in excess of $100,000 during 1996.
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS ------------------- ----------------------------- BONUS SECURITIES (PERFORMANCE RESTRICTED UNDERLYING NAME AND BASED STOCK OPTIONS ALL OTHER PRINCIPAL POSITION YEAR SALARY INCENTIVE) AWARD (# OF SHARES) COMPENSATION - ------------------ ---- ------ ---------- --------- ------------- ---------------- William H. Lawson, 1996 $383,000 $203,000 - - $14,465 Chairman of the 1995 383,000 100,000 - 100,000 28,501 Board and Chief 1994 300,000 210,000 - 80,000 14,465 Executive Officer John B. Lindsay, 1996 $239,500 $148,000 - - $5,250 President 1995 208,000 85,000 - - 5,250 1994 160,000 112,000 $530,000 50,000 5,250 Jess B. Ford, 1996 $160,000 $ 99,000 - 15,000 $5,250 Vice President and Chief Financial Officer William J. Foreman, 1996 $125,000 $ 77,000 - - $5,250 Vice President 1995 111,500 75,000 - - 5,250 Donald R. Hobbs, 1996 $115,104 $ 71,000 - 10,000 $5,250 Vice President, Submersible Motor Marketing Kirk M. Nevins, 1996 $125,000 $ 77,000 - 10,000 $7,654 Vice President, 1995 117,000 50,000 - - $5,250 Sales Messrs. Lindsay, Nevins and Foreman received awards in 1994 of 20,000, 5,000 and 7,000 shares, respectively, under the 1988 Stock Incentive Award Plan. The December 28, 1996 market values of these shares were $905,000, $226,250 and $316,750, respectively. All Other Compensation reflects Company matching contributions to defined contribution plans for each executive officer, except that the amounts shown for Mr. Lawson also include premiums incurred by the Company in connection with executive split-dollar insurance arrangements that restore Mr. Lawson's benefits to the level in effect when he was first employed by the Company adjusted for benefit increases, if any, awarded to all covered employees and reimbursement of taxes paid in connection with the Company's Pension Restoration Plan. The matching contributions and split-dollar insurance premium payments for Mr. Lawson were $5,250 and $9,215, respectively, in each of 1996, 1995 and 1994. Mr. Lawson was also reimbursed for $14,036 of taxes paid in 1995. In addition, Mr. Nevins received a twenty-five year anniversary bonus of $2,404 in 1996. Mr. Ford was hired by the Company in October, 1995. Mr. Nevins and Mr. Foreman were elected executive officers of the Company in July, 1995. Mr. Hobbs was elected executive officer of the Company in April, 1996.
OPTION GRANTS IN LAST FISCAL YEAR Potential Percent Realizable Value Number of of Total at Assumed Annual Securities Options Exercise Rates of Stock Price Underlying Granted to or Appreciation for Options Employees Base Option Term Granted in Fiscal Price Expiration ------------------- Name (#) Year ($/Sh) Date 5% ($) 10% ($) - ---- ------ ---- ------ ---- ------ ------- William H. Lawson - - - - - - John B. Lindsay - - - - - - Jess B. Ford 15,000 14 $42.00 12/13/06 396,204 1,004,058 William J. Foreman - - - - - - Donald R. Hobbs 10,000 9 $42.00 12/13/06 264,136 669,372 Kirk M. Nevins 10,000 9 $42.00 12/13/06 264,136 669,372 Options were granted on December 13, 1996 and vest 20 percent each year over a five-year period. Amounts represent hypothetical gains that could be achieved based upon assumed annual compound stock appreciation rates of 5 percent and 10 percent over the original full (10-year) term of the options. The 5 percent and 10 percent rates of stock appreciation are mandated by SEC rules and do not represent the Company's estimate of the future market price of its Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Shares Options at Options at Acquired Fiscal Fiscal on Value Year-End (#) Year-End ($) Exercise Realized Exercisable/ Exercisable/ Name (#) ($) Unexercisable Unexercisable - ---- -------- -------- ------------- ----------------- William H. Lawson 24,327 $775,788 206,245/128,000 6,727,081/2,040,000 John B. Lindsay 27,000 752,875 20,000/ 30,000 375,000/ 562,500 Jess B. Ford - - 6,000/ 39,000 79,500/ 366,750 William J. Foreman - - 26,880/ 12,000 879,069/ 225,000 Donald R. Hobbs 4,440 160,328 14,000/ 16,000 441,250/ 145,000 Kirk M. Nevins - - 8,000/ 16,000 221,500/ 145,000 Based on the excess of the fair market value of the Common Stock over the option price on the date of exercise. Based on fair market value of the Common Stock of $45 1/4 on December 28, 1996.
COMPENSATION PURSUANT TO PLANS PENSIONS The Company has three pension plans in which executive officers participate: the Franklin Electric Co., Inc. Basic Retirement Plan, the Franklin Electric Co., Inc. Contributory Retirement Plan, and the Franklin Electric Co., Inc. Pension Restoration Plan (collectively referred to herein as the "Pension Plans"). The Company also maintains a fourth pension plan covering employees of a subsidiary; no executive officers participate in this plan. The following table illustrates the approximate combined annual pension benefit payable upon retirement at age 65 under the Pension Plans, after integration with social security. In the table, Annual Compensation is based on the highest thirty-six consecutive months' compensation which includes salary and bonus. COMBINED ANNUAL PENSION AMOUNT, INCLUDING SOCIAL SECURITY ANNUAL COMPEN- YEARS OF SERVICE SATION 10 15 20 25 30 35 - -------------------------------------------------------------------------- $150,000 $ 52,500 $ 60,000 $ 67,500 $ 75,000 $ 84,900 $ 96,400 200,000 70,000 80,000 90,000 100,000 105,900 120,900 250,000 87,500 100,000 112,500 125,000 126,900 145,400 300,000 105,000 120,000 135,000 150,000 150,000 169,900 350,000 122,500 140,000 157,500 175,000 175,000 194,400 400,000 140,000 160,000 180,000 200,000 200,000 218,900 450,000 157,500 180,000 202,500 225,000 225,000 243,400 500,000 175,000 200,000 225,000 250,000 250,000 267,900 550,000 192,500 220,000 247,500 275,000 275,000 292,400 600,000 210,000 240,000 270,000 300,000 300,000 316,900 Estimated years of service for the named executive officers eligible to receive the foregoing pension amounts are as follows: Mr. Lawson, 11 years; Mr. Lindsay, 19 years; Mr. Ford, 1 year; Mr. Foreman, 27 years; Mr. Hobbs, 12 years; and Mr. Nevins, 24 years. AGREEMENTS The Company has employment agreements with William H. Lawson, Chairman and Chief Executive Officer, and Jess B. Ford, Vice President and Chief Financial Officer (the "Employees"). The agreements may be terminated by either the Company or the Employees upon 90 days advance written notice. Under the agreements, the Company, depending on the reason for termination of employment, may be required to pay the Employees their annual compensation, including bonus, for a period of one year after termination and all stock options and stock appreciation rights held by the Employees may become immediately exercisable. If termination is effected in connection with a change in control of the Company, the Company may be required to pay Mr. Lawson and Mr. Ford their annual compensation for up to three years and two years, respectively, from the date of termination or change in control, whichever is earlier, and to continue to provide them with certain benefits under the Company's benefit plans in which they were a participant at the time of their termination of employment. Mr. Lindsay, President, owes the Company $452,000 as of January 31, 1997 for amounts borrowed in connection with a stock purchase under the Company's 1988 Executive Stock Purchase Plan. The borrowing is evidenced by a non- recourse promissory note bearing no interest, and the related shares are pledged to secure repayment. The maximum amount outstanding at any time during the last fiscal year was $477,000. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS The Board of Directors has appointed, subject to ratification by the shareholders, the firm of Deloitte & Touche LLP as independent auditors for the 1997 fiscal year. Although shareholder ratification is not legally required, the Board of Directors believes it advisable to submit its decision to the shareholders. Deloitte & Touche LLP has acted as auditor for the Company since 1988. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and to be available to respond to questions relating to their examinations of the Company's financial statements. SHAREHOLDER PROPOSALS November 7, 1997 is the date by which proposals of shareholders intended to be presented at the next Annual Meeting must be received by the Company to be considered for the inclusion in the Company's proxy statement for the 1998 Annual Meeting. OTHER BUSINESS Management has no knowledge of any other matters to be presented for action by the shareholders at the 1997 Annual Meeting. The enclosed proxy gives discretionary authority to the persons designated as proxies therein to vote on any additional matters that should properly and lawfully be presented. By order of the Board of Directors Dated: March 7, 1997 Dean W. Pfister, Secretary APPENDIX 1 FRANKLIN ELECTRIC PROXY Franklin Electric Co., Inc. 400 East Spring Street Bluffton, IN 46714 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints William H. Lawson and Dean W. Pfister as Proxies, and each of them, with full power of substitution, with all power the undersigned would possess if personally present, and to vote all shares of common stock of Franklin Electric Co., Inc. held of record by the undersigned on February 28, 1997, which the undersigned would be entitled to vote at the Annual Meeting of Shareholders to be held on April 11, 1997 or any adjournment or postponement thereof. 1. ELECTION OF DIRECTORS. Proposal to elect Robert H. Little, Patricia Schaefer and Gerard E. Veneman as directors to serve until the 2000 Annual Meeting of Shareholders, FOR all nominees[ ] WITHHOLD AUTHORITY to vote for all nominees[ ] (INSTRUCTION: To withhold authority to vote for any individual nominee strike a line through the nominee's name in the list below.) Robert H. Little Patricia Schaefer Gerard E. Veneman 2. APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to ratify the appointment of Deloitte & Touche LLP as independent auditors for the 1997 fiscal year. [ ]FOR [ ]AGAINST [ ]ABSTAIN 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting, or any adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 and 2. Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. DATED , 1997 -------------------------------- - ------------------------------------------- Signature - ------------------------------------------- Signature if held jointly PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. -----END PRIVACY-ENHANCED MESSAGE-----