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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.
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
BONUS SECURITIES
(PERFORMANCE UNDERLYING
NAME AND BASED OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY INCENTIVE) (# OF SHARES) COMPENSATION
------------------ ---- ------ --------- ----------- ------------
William H. Lawson, 2001 $475,000 $356,250 20,000 $ 5,950
Chairman of the 2000 475,000 134,000 - 11,181
Board, CEO and 1999 414,000 290,000 - 20,981
President
Jess B. Ford, 2001 $220,000 $165,000 7,500 $5,950
Sr. Vice President 2000 200,000 94,000 20,000 5,950
1999 200,000 140,000 - 5,600
Peter-Christian Maske,2001 $220,000 $165,000 - $5,950
Sr. Vice President, 2000 200,000 94,000 20,000 5,950
Operations 1999 177,000 124,000 50,000 13,410
Gregg C. Sengstack, 2001 $175,000 $131,250 6,500 $5,950
Sr. Vice President, 2000 175,000 82,250 15,000 5,950
Chief Financial 1999 125,000 87,500 - 5,600
Officer
William J. Foreman, 2001 $155,000 $116,250 - $17,873
Vice President 2000 155,000 72,850 10,000 6,887
1999 145,000 101,500 - 6,641
All Other Compensation for 2001 reflects (i)Company matching
contributions to employee benefit plans of $5,950 for each executive
officer, and (ii) payment of accrued vacation of $11,923 to Mr. Foreman
upon his retirement effective January 1, 2002.
At his initiative, during 2001, Mr. Lawson contributed one week of work
at the Company without salary compensation. Consequently, Mr. Lawson was
actually paid $465,874 in salary compensation for 2001.
Mr. Maske was elected an executive officer of the Company in October,
1999.
Mr. Sengstack was elected an executive officer of the Company in April,
1999.
OPTION GRANTS IN 2001 FISCAL YEAR
Percent Potential
Number of of Total Realizable Value
Securities Options Exercise at Assumed Annual
Underlying Granted to or Rates of Stock Price
Options Employees Base Appreciation for
Granted(1) in Fiscal Price Expiration Option Term
Name (#) Year ($/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.