ThZeal - The Zeal

DEF 14A 1 rproxy_02.txt PROXY FRANKLIN ELECTRIC 400 East Spring Street Bluffton, Indiana 46714 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held April 19, 2002 at 9:00 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 19, 2002, AT 9:00 A.M., E.S.T., FOR THE FOLLOWING PURPOSES: 1. To elect three directors for terms expiring at the 2005 Annual Meeting of Shareholders; 2. To ratify the appointment of Deloitte & Touche LLP as independent auditors for the 2002 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 22, 2002 will be entitled to notice of and to vote at the Annual Meeting. You are urged to vote your proxy regardless of whether 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 8, 2002 FRANKLIN ELECTRIC CO., INC. 400 EAST SPRING STREET BLUFFTON, INDIANA 46714 ----------------------- PROXY STATEMENT --------------- ANNUAL MEETING OF SHAREHOLDERS APRIL 19, 2002 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 19, 2002 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 8, 2002. Neither the Annual Report nor the financial statements contained therein are to be considered part of this soliciting material. 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. VOTING INSTRUCTIONS Shareholders may attend the Annual Meeting and vote their shares in person. Shareholders may also choose to submit their proxies by any of the following methods: VOTING BY MAIL: Complete the enclosed proxy, date and sign it, and return it in the envelope provided. VOTING BY TELEPHONE: Call the toll-free telephone number provided on the proxy. Telephone voting will be available through April 15, 2002, 24 hours a day. Detailed instructions will be provided during the call, and the procedures are designed to authenticate votes cast by using the last 4 digits of shareholder's social security/taxpayer I.D. number. Shareholders that vote by telephone should not return the proxy card. VOTING BY INTERNET: Sign-on to the website identified on the proxy. Internet voting will be available through April 15, 2002, 24 hours a day. Detailed instructions will be provided on the website, and the procedures are designed to authenticate votes cast by using the last 4 digits of shareholder's social security/taxpayer I.D. number. Shareholders that vote by internet should not return the proxy card. SHAREHOLDERS WHO ARE PARTICIPANTS IN THE COMPANY'S EMPLOYEE STOCK OWNERSHIP PLAN AND/OR DIRECTED INVESTMENT SALARY PLAN WILL RECEIVE A VOTING INSTRUCTION CARD THAT COVERS THE SHARES CREDITED TO HIS OR HER PLAN ACCOUNTS. SUCH SHAREHOLDERS MAY NOT VOTE THEIR PROXY BY TELEPHONE OR INTERNET. If the enclosed proxy is properly voted, 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 ratification of the appointment of Deloitte & Touche LLP as independent auditors for the 2002 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 by mail, over the telephone or through the internet, or (iii) by attending the Annual Meeting and voting in person. SHAREHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING The Board of Directors of the Company fixed the close of business on February 22, 2002 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 5,348,167 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 22, 2002, unless otherwise noted. 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 Wells Fargo Bank Minnesota, N.A. 768,314 (1) 14.37 Midwest Plaza, West Tower Suite 700 801 Nicolette Mall Minneapolis, MN 55479-0065 Patricia Schaefer 488,021 (2) 9.11 5400 Deer Run Court Muncie, IN 47304 Diane D. Humphrey 462,021 8.64 2279 East 250 North Road Bluffton, IN 46714 Marvin C. Schwartz 377,146 (3) 7.05 c/o Neuberger & Berman 605 Third Avenue New York, NY 10158 Ruane, Cunniff & Co., Inc. 341,825 (4) 6.39 767 5th Avenue, Suite 4701 New York, NY 10153 T. Rowe Price Associates, Inc. 321,400 (5) 6.01 100 E. Pratt Street Baltimore, MD 21202 (1) Wells Fargo Bank holds these shares as Trustee under the Company's Employee Stock Ownership Plan (the "ESOP"), Directed Investment Salary Plan (the "401(k) Plan"), and defined benefit pension plans. Share information is from January 2002 Trust records provided by Wells Fargo Bank. 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 allocated 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 Trustee has no investment power over any allocated shares and has shared investment power over any unallocated shares. The shares held in the defined benefit pension plans will be voted pursuant to the direction of the Employee Benefits Committee of the Company, which also has investment power over any of these shares. (2) Includes 11,000 shares issuable pursuant to stock options exercisable within 60 days after February 22, 2002. (3) According to a Schedule 13D filed with the SEC on December 19, 2000, Marvin C. Schwartz has sole investment and sole voting power with respect to 296,160 shares, shared investment power with respect to 80,986 shares and no shared voting power. (4) According to a Schedule 13G filed with the SEC on February 14, 2002, Ruane, Cunniff & Co., Inc. has sole investment power with respect to 341,825 shares, sole voting power with respect to 75,715 shares and no shared voting or investment power. (5) According to a Schedule 13G filed with the SEC on February 12, 2002, T. Rowe Price Associates, Inc. has sole investment power with respect to 321,400 shares, sole voting power with respect to 103,550 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 February 22, 2002. 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 488,021(1) 9.11 William H. Lawson 246,922(1)(2) 4.47 John B. Lindsay 102,754(1)(2) 1.92 Donald J. Schneider 50,526(1) * Jess B. Ford 49,851(1)(2) * Gregg C. Sengstack 42,079(1)(2) * Peter-Christian Maske 39,311(1)(2) * Juris Vikmanis 20,000(1) * Robert H. Little 17,648(1) * Howard B. Witt 14,650(1) * William J. Foreman 11,239(2) * R. Scott Trumbull 6,200(1)(3) * Jerome D. Brady 5,205(1)(3) * All directors and 1,175,519(1)(2) 20.45 executive officers as a group * Less than 1 percent of class (1) Includes shares issuable pursuant to stock options exercisable within 60 days after February 22, 2002 as follows: Ms. Schaefer, 11,000; Mr. Lawson, 180,000; Mr. Lindsay, 5,000; Mr. Schneider, 14,000; Mr. Ford, 49,000; Mr. Sengstack, 13,600; Mr. Maske, 33,000; Mr. Vikmanis, 14,000; Mr. Little, 11,000; Mr. Witt, 14,000; Mr. Trumbull, 5,000; Mr. Brady, 5,000; and all directors and executive officers as a group, 399,200. (2) Includes shares held by the ESOP Trustee as to which the individuals do not have investment power as follows: Mr. Lawson, 2,032; Mr. Lindsay, 1,320; Mr. Ford, 576; Mr. Sengstack, 1,300; Mr. Maske, 229; Mr. Foreman, 1,547; and all directors and executive officers as a group, 10,841. (3) Excludes 878 stock units credited to Mr. Brady and 437 stock units credited to Mr. Trumbull pursuant to the terms of the Nonemployee Directors' Deferred Compensation Plan described under "Information About the Board and its Committees". 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 2001. 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 elected to serve terms of three years and until their successors have been elected and qualified. Three directors will be elected at the Annual Meeting this year. Directors are elected by the affirmative vote of a plurality of the shares voted (i.e. the three nominees who receive the most votes will be elected). John B. Lindsay, Juris Vikmanis and Howard B. Witt have been nominated to serve as directors of the Company for terms expiring in 2005. 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, shares represented by the proxies will be voted for the election of another nominee proposed by the Board of Directors or the Board may reduce the number of directors to be elected at the Annual Meeting. 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 2005 DIRECTOR NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE John B. Lindsay, 59 Retired in February 2000; 1996 Vice Chairman of the Formerly President of the Board of the Company Company from 1995. Juris Vikmanis, 64 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, 61 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. and Material Sciences Corp. CONTINUING DIRECTORS -------------------- DIRECTORS WHOSE TERMS EXPIRE IN 2003 DIRECTOR NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE Jerome D. Brady, 58 Retired in 2000; Formerly 1998 Director of the Company President & Chief Executive Officer of C&K Components from 1997, a manufacturer of electro-mechanical switches; prior thereto, Chairman, President and Chief Executive Officer of AM International from 1994-1997; Director, PCD, Inc. Robert H. Little, 66 Retired in 1997; Formerly 1987 Director of the Company President, Waddle Manufacturing Inc., a producer of precision fabrications for the electronics and medical device industries. Patricia Schaefer, 71 Retired; Director Muncie Public 1982 Director of the Company Library; Muncie, Indiana. DIRECTORS WHOSE TERMS EXPIRE IN 2004 DIRECTOR NAME AND POSITION AGE PRINCIPAL OCCUPATION SINCE William H. Lawson, 65 Chairman of the Board, Chief 1985 Chairman of the Board, Executive Officer and President Chief Executive Officer of the Company. Director of and President Skyline Corporation and Sentry Insurance, a Mutual Company. Donald J. Schneider, 66 President of Schneider National 1988 Director of the Company Inc., an asset based logistics company. Director of Green Bay Packers. R. Scott Trumbull, 53 Exec. Vice President and 1998 Director of the Company Chief Financial Officer (2001), International Operations & Corp. Development, Owens-Illinois, a manufacturer of glass & plastic packaging, since August 1998; prior thereto, Vice President International Operations, 1993 to 1998. Director, Health Care REIT. INFORMATION ABOUT THE BOARD AND ITS COMMITTEES In 2001, nonemployee directors were paid an annual director's fee of $30,000 plus a fee of $1,500 for each regular Board and Board committee meeting attended. Each committee chairman received an additional fee of $3,500 in 2001. In 2002, the directors' fee will be $35,000 plus a fee of $1,500 for each regular Board and Board committee meeting attended. Each committee chairman will receive an additional fee of $3,500 in 2002. Directors who are employees of the Company receive no additional compensation for serving on the Board or Board committees. Mr. Lindsay was paid $135,000 for consulting services rendered to the Company during 2001. In 2001, Mr. Lindsay was also paid a bonus of $63,450 for services he rendered to the Company as an employee during 2000. Nonemployee directors participate in the Franklin Electric Co., Inc. Amended and Restated 1996 Nonemployee Director Stock Option Plan (the "Amended 1996 Director Plan"). Under the Amended 1996 Director Plan, each person who is a nonemployee director of the Board following each Annual Meeting shall be granted an option to purchase 5,000 shares at an option price equal to the fair market value of the Company's Common Stock on the date the option is granted. On April 20, 2001, Mr. Brady, Mr. Lindsay, Mr. Little, Ms. Schaefer, Mr. Schneider, Mr. Trumbull, Mr. Vikmanis and Mr. Witt each received an option to purchase 5,000 shares at an exercise price of $68.00 per share. Nonemployee directors may also participate in the Nonemployee Directors' Deferred Compensation Plan (the "Deferred Compensation Plan"). Under the Deferred Compensation Plan, each nonemployee director may elect to receive his or her annual director's fee in Company shares or in cash. If Company shares are elected, nonemployee directors may also elect to defer issuance of the shares (until service on the Board terminates), in which case the director's fee is converted into stock units. Mr. Brady elected to receive his fiscal 2001 director's fees in Company shares and to defer issuance of the shares. Accordingly, on April 20, 2001, Mr. Brady was credited with 441 stock units. The Company has a Consulting Directors' Plan for nonemployee directors who retire from Board service at age 70 or older. Under the Consulting Directors' 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 2001, Dr. N. A. Lamberti, Mr. William W. Keefer and Mr. Gerard E. Veneman, who retired in 1988, 1996 and 1998, with 19, 28 and 29 years of service, respectively, participated in the Consulting Directors' Plan. Mr. Lamberti received an annual fee of $15,000 in 2001. Messrs. Keefer and Veneman each received an annual fee of $20,000 in 2001. The Board held five (5) regularly scheduled meetings during 2001. The board held one special meeting by conference call on June 18, 2001. 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. The current members of the Audit Committee are Robert H. Little (Chairman), Jerome D. Brady, Patricia Schaefer and Juris Vikmanis. Each member of the Audit Committee is an "independent director", as that term is defined in Rule 4200(a)(15) of the listing standards of the National Association of Securities Dealers, Inc. ("NASD"). The Company's Board of Directors adopted on February 11, 2000 a revised "Franklin Electric Co., Inc. Audit Committee Charter" (the "Charter"). Pursuant to the Charter, the Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information which will be provided to shareholders and others, the system of internal control which management has established, the Company's process for monitoring compliance with laws and regulations, and the audit process. It is the general 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 are set forth in the Charter. The Audit Committee held three (3) meetings in 2001. PERSONNEL AND COMPENSATION COMMITTEE. The current members of the Personnel and Compensation Committee (the "Compensation Committee") are Donald J. Schneider (Chairman), R. Scott Trumbull 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. The notice must 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 five (5) meetings in 2001. AUDIT COMMITTEE REPORT In accordance with rules enacted by the Securities and Exchange Commission, the Audit Committee of the Company states that: The Audit Committee has reviewed and discussed with management the Company's audited financial statements for the fiscal year ended December 29, 2001. The Audit Committee has discussed with Deloitte & Touche LLP, the Company's independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 61, as modified or supplemented. The Audit Committee has received the written disclosures and the letter from Deloitte & Touche LLP required by Independence Standards Board Standard No. 1 ("Independence Discussions with Audit Committees"), as modified or supplemented, and has discussed with Deloitte & Touche LLP the independent accountant's independence. Based upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company's audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001 for filing with the Securities and Exchange Commission. This report is submitted on behalf of the members of the Audit Committee: Robert H. Little (Chairman) Jerome D. Brady Patricia Schaefer Juris Vikmanis 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. 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 at average 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 benchmarks used were pre-tax return on net assets and earnings per share growth rate. Considering these ratios, a bonus percentage of base salary was then determined. The Committee awarded the Chief Executive Officer an incentive cash bonus of 75 percent of base salary for 2001. As an additional incentive, the Committee makes grants and awards under the Company's shareholder-approved stock option plans as well as offering the Chief Executive Officer and other 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 2001, the Committee made stock option grants to six executive officers of the Company, including Mr. Lawson, Mr. Ford, and Mr. Sengstack (as reported in the Option Grant Table below). 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 2001 and is not expected to have an effect on compensation payable in 2002. Donald J. Schneider (Chairman) Howard B. Witt R. Scott Trumbull STOCK PERFORMANCE GRAPH The following graph compares the cumulative total shareholder return on an investment in (1) the Company's Common Stock (including reinvestment of dividends), (2) the Standard & Poor's 500 Stock Index (including reinvestment of dividends), and (3) the Russell 2000 Stock Index (including reinvestment of dividends) for the period December 31, 1996 through December 31, 2001. In each case, the graph assumes the investment of $100 on December 31, 1996. $400 $300 208 $200 189 184 171 155 153 166 139 147 145 140 144 133 122 119 $100 $0 1996 1997 1998 1999 2000 2001 YEAR FRANKLIN ELECTRIC S&P 500 RUSSELL 2000 SUMMARY COMPENSATION TABLE The following table sets forth compensation information for the years 1999 through 2001 for the Company's Chief Executive Officer and the Company's other four most highly compensated executive officers who served as executive officers of the Company during 2001.

OPTION GRANTS IN 2001 FISCAL YEAR Percent Potential Number of of Total Realizable Value Securities Options Exercise at Assumed Annual Underlying Granted to or Rates of Stock Price Options Employees Base Appreciation for Granted(1) in Fiscal Price Expiration Option Term Name (#) Year ($/Sh) Date 5% ($) 10%($) ---- -------- --------- ------- --------- ----- ----- William H. Lawson 20,000 17% $78.55 12/13/11 $987,994 $2,503,769 Jess B. Ford 7,500 6% $78.55 12/13/11 $370,498 $938,914 Peter-Christian Maske - - - - - - Gregg C. Sengstack 6,500 5% $78.55 12/13/11 $321,098 $813,725 William J. Foreman - - - - - - (1) Options were granted on December 13, 2001 and vest at a rate of 20% per year beginning in 2002. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Shares Options at Options at Acquired Fiscal Fiscal on Value Year-End (#) Year-End($) Exercise Realized(1) Exercisable/ Exercisable/ Name (#) ($) Unexercisable Unexercisable(2) ---- -------- -------- ------------- ------------- William H. Lawson - - 180,000/20,000 $9,401,400/$53,600 Jess B. Ford - - 49,000/23,500 $2,132,270/$287,780 Peter-Christian Maske - - 33,000/46,000 $604,590/$267,680 Gregg C. Sengstack - - 13,600/19,900 $475,628/$256,127 William J. Foreman 10,000 $486,700 12,000/8,000 $580,760/$133,840 (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 $81.23 on December 28, 2001 over the option exercise price. PENSION PLANS The Company has three pension plans in which executive officers participate: the Franklin Electric Co., Inc. Basic Retirement Plan, the Franklin Electric Co., Inc. Cash Balance 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 $ 76,900 $ 88,600 $100,300 200,000 70,000 80,000 90,000 100,000 109,600 124,800 250,000 87,500 100,000 112,500 125,000 130,600 149,300 300,000 105,000 120,000 135,000 150,000 151,600 173,800 350,000 122,500 140,000 157,500 175,000 175,000 198,300 400,000 140,000 160,000 180,000 200,000 200,000 222,800 450,000 157,500 180,000 202,500 225,000 225,000 247,300 500,000 175,000 200,000 225,000 250,000 250,000 271,800 550,000 192,500 220,000 247,500 275,000 275,000 296,300 600,000 210,000 240,000 270,000 300,000 300,000 320,800 650,000 227,500 260,000 292,500 325,000 325,000 345,300 700,000 245,000 280,000 315,000 350,000 350,000 369,800 750,000 262,500 300,000 337,500 375,000 375,000 394,300 Years of service for the named executive officers eligible to receive the foregoing pension amounts are as follows: Mr. Lawson, 16 years; Mr. Ford, 6 years; Mr. Sengstack, 13 years; and Mr. Foreman, 36 years. For Mr. Maske's pension calculations, he has 2 years of service under pension plans of the Company and 25 years of service under pension plans of one of the Company's foreign subsidiaries. His combined annual pension amount, including social security (both U.S. and foreign) does not exceed the benefits listed in the table above. AGREEMENTS The Company has employment agreements with William H. Lawson, Chairman, Chief Executive Officer and President; Jess B. Ford, Senior Vice President; and Gregg C. Sengstack, Senior 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 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 his annual compensation for up to three years, and Mr. Ford and Mr. Sengstack their annual compensation for up to two years, 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. 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 2002 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. The aggregate fees for professional services rendered by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte") for the audit of the Company's annual financial statements for the fiscal year ended December 29, 2001 and for the reviews of the financial statements included in the Corporation's Quarterly Reports on Form 10-Q for that fiscal year were $166,700. Audit related expenses for the fiscal year ended December 29, 2001 were $26,000. The aggregate fees for other services rendered by Deloitte for the fiscal year ended December 29, 2001 were $83,000. These fees were incurred for the audits of the Company's employee benefit plans, acquisition due diligence procedures, and tax services. The Audit Committee of the Company's Board of Directors has considered whether such other services rendered by Deloitte is compatible with maintaining the principal accountant's independence. The Company did not engage Deloitte for management consulting or information systems services in 2001. SHAREHOLDER PROPOSALS November 4, 2002 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 2003 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 19, 2003 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 2002 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 8, 2002 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 Gregg C. Sengstack 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 22, 2002, which the undersigned would be entitled to vote at the Annual Meeting of Shareholders to be held on April 19, 2002 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 2005 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. APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to ratify the appointment of Deloitte & Touche LLP as independent auditors for the 2002 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 postponements 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________________________________, 2002 ___________________________________________ Signature ___________________________________________ Signature if held jointly PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.