AMENDED EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT is entered into as of this 20th day of
December, 2002 between FRANKLIN ELECTRIC CO., INC. ("Franklin"), an Indiana
corporation, and Xxxxx X. Xxxxxxxxx (the "Executive").
WHEREAS, Franklin and Executive previously entered into an employment
agreement dated as of December 7, 2000 (the "Employment Agreement") and now
desire to amend and restate that Employment Agreement in its entirety;
NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Franklin agrees to employ Executive as its Senior
Vice President and Chief Financial Officer to perform all such duties as are
normally associated with such position in companies of similar size and
nature or are prescribed for such office by the by-laws or directed by the
Board of Directors, and Executive agrees to serve Franklin in such capacity
and devote his full business time and attention to the business of Franklin,
subject to vacations, holidays, normal illnesses and a reasonable amount of
time for civic, community and industry affairs. Executive agrees not to
accept membership on the Board of Directors of any other business corporation
without the prior approval of the Personnel and Compensation Committee of the
Board of Directors of Franklin.
2. TERM. The employment of Executive hereunder (the "Term") shall
be for a period of three years ending on December 31, 2005, provided that on
January 1, 2004 and each January 1 thereafter during the Term (each such
January 1 occurring during the Term being an "Anniversary Date"), the Term
shall automatically and without any action by either party hereto be extended
for an additional period of one year unless at least ninety (90) days prior
to any Anniversary Date that occurs after December 31, 2005 either party
notifies the other of its election not to extend the then current Term, in
which case the Term shall end at the expiration of the Term as last extended.
Following any such notice by the Company of its election not to extend the
Term, the Executive may terminate his employment at any time prior to the
expiration of the Term by giving written notice to the Company at least
thirty (30) days prior to the effective date of termination, and upon the
earlier of such effective date of termination or the expiration of the Term
the Executive shall be entitled to receive the same compensation and benefits
as are provided in subparagraph (b) of paragraph 6 but for a severance period
which shall begin on the effective date of termination or expiration of the
Term, as the case may be, and ending on the earlier of (i) the date on which
Executive would attain his normal retirement age (as defined in the Franklin
Electric Co., Inc. Basic Retirement Plan, hereinafter referred to as "Normal
Retirement Age"), or (ii) twelve (12) months.
3. COMPENSATION. Franklin shall pay for or provide to Executive for
all services to be performed by Executive under this Agreement the following:
(a) A fixed salary of $235,000 per annum, or such higher amount
as the Board of Directors of Franklin may from time to time authorize
(which amount shall not be reduced below the amount at any time in
effect without Executive's consent), payable in equal monthly
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installments (such amount from time to time in effect being referred to
herein as "Executive's Salary");
(b) Such bonus as may be allocated to Executive by the
Compensation Committee of Franklin's Board of Directors pursuant to the
Franklin Executive Officer Bonus Plan;
(c) Participation in Franklin's Stock Option Plans, as long as
such plans remain in effect, and in any future compensation plans
covering senior executives of Franklin;
(d) Participation in Franklin's employee benefit plans,
policies, practices and arrangements in which other senior executives of
Franklin participate as long as such plans, policies, practices and
arrangements remain in effect, and in any future employee benefit plans
and arrangements covering senior executives, including without
limitation any defined benefit retirement plan, excess plan (including,
but not limited to the Pension Restoration Plan), profit sharing plan,
health or dental plan, disability plan, survivor income plan, or life
insurance plan (collectively, the "Benefit Plans").
(e) Paid vacations and sick leave in accordance with Franklin's
policies respecting same as in effect from time to time; and
(f) All fringe benefits and perquisites offered by Franklin
from time to time to senior executives.
4. EXPENSES. Franklin shall promptly pay or reimburse Executive for
all reasonable expenses incurred by Executive in the performance of duties
hereunder in accordance with expense policies from time to time in effect for
senior executives of Franklin.
5. CONDITIONS OF EMPLOYMENT. During the Term, Executive shall be
furnished office space, assistance and accommodations suitable to the
character of his position with Franklin and adequate for the performance of
his duties. Executive's services shall be performed at Franklin's principal
executive office in Bluffton, Indiana, except when the nature of Executive's
duties hereunder requires reasonable domestic and foreign travel.
6. TERMINATION OF EMPLOYMENT. Either Executive or Franklin may
terminate Executive's employment hereunder at any time upon giving the other
at least ninety (90) days advance written notice of such termination,
provided that Franklin may specify an earlier date of termination (not
earlier than the date of such notice) if termination is for Good Cause (as
defined below), and Executive may specify an earlier date of termination (not
earlier than the date of such notice) if termination is for Good Reason (as
defined below), and provided further that if termination is due to the death
of Executive, termination shall be effective immediately upon such death and
without any requirement for written notice. In the event of any termination
hereunder Executive shall be entitled to receive compensation and benefits
only as hereinafter set forth or as provided in paragraph 2:
(a) If Executive's employment is terminated by Executive
without Good Reason or by Franklin with Good Cause (i) Executive's
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compensation under (a) and (b) of Paragraph 3 shall be limited to a
pro-rata portion of Executive's Salary (and not any bonus) for the year
of termination, and (ii) Executive shall continue to be provided with
the benefits under (c), (d), (e) and (f) of Paragraph 3, (subject
however to all terms, if any, of the Benefit Plans that may be
applicable to termination of employment) until the effective date of
the termination;
(b) If at any time other than as specified in subparagraph (c)
of this paragraph 6, Franklin shall terminate Executive's employment
without Good Cause, or Executive shall voluntarily terminate such
employment with Good Reason, (i) Executive's compensation under (a) and
(b) of Paragraph 3 for the portion of the year of termination prior to
the effective date of termination shall be a pro-rata portion of
Executive's Salary for such year, together with a bonus equal to not
less than a pro-rata portion of his bonus paid or payable for the year
prior to the year of termination, (ii) Executive shall receive as
compensation for the severance period described below an additional
amount, payable in a lump sum within thirty (30) days after the
effective date of his termination of employment, computed by
annualizing the compensation which he is to receive pursuant to clause
(i) above, (iii) Executive shall continue to be provided with the
benefits under (c) and (d) of Paragraph 3 for such severance period,
and (iv) any stock options granted to Executive by Franklin shall be
accelerated and become immediately exercisable in full on the effective
date of termination, subject to any limitations on the order of
exercise which may be applicable to incentive stock options (as defined
in Section 422 of the Internal Revenue Code of 1986, as amended), if
any, that may hereafter be granted, and shall remain exercisable for
such period after the effective date of termination as is provided
under the terms of the options and the plans pursuant to which they
were issued. The severance period for this subparagraph (b) of
paragraph 6 shall be the period beginning on the date of termination
and ending on the earlier of (A) the date on which Executive would
attain his Normal Retirement Age, or (B) eighteen (18) months.
(c) If within two (2) years after a Change in Control, (i)
Franklin shall terminate Executive's employment with Franklin without
Good Cause, (ii) Executive shall voluntarily terminate such employment
with Good Reason, or (iii) Executive shall voluntarily terminate such
employment for any reason whatsoever during the period beginning on the
first anniversary of the Change in Control and ending thirty (30) days
thereafter, Franklin shall, within thirty (30) days after any such
termination, pay to Executive (A) a lump sum cash amount as
compensation under (a) and (b) of Paragraph 3 for the portion of the
year of termination prior to the effective date of termination equal to
a pro-rata portion of Executive's Salary for such year, together with a
bonus equal to not less than a pro-rata portion of his bonus paid or
payable for the year prior to the year of termination, (B) a lump sum
cash amount, as compensation for the severance period described below,
computed by annualizing the compensation which he is to receive
pursuant to clause (A) above, and (C) in settlement of any stock
options then outstanding (whether or not then exercisable), a lump sum
cash payment equal to the difference between the aggregate fair market
value of the shares subject to such options as of the date of such
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termination and the aggregate exercise price thereof. In addition,
Executive shall, following his termination of employment under this
subparagraph (c) of paragraph 6, for the severance period described
below continue to be provided with the benefits under (c) and (d) of
Paragraph 3. The severance period for this subparagraph (c) of
paragraph 6 shall be the period beginning on the date of termination
and ending on the earlier of (A) the date on which Executive would
attain his Normal Retirement Age, or (B) thirty-six (36) months.
(d) Franklin agrees that with respect to any compensation or
benefits payable hereunder to Executive with respect to termination of
his employment with Franklin for any reason whatsoever, Executive shall
not be required to mitigate his damages by seeking other employment or
otherwise, and Franklin's obligations hereunder shall not be reduced in
any way by reason of any compensation received by Executive from
sources other than Franklin after the termination of Executive's
employment with Franklin for any reason whatsoever.
(e) In the event that Executive is subject to an excise tax
under Section 4999 of the Internal Revenue Code of 1986 with respect to
any cash, benefits or other property received, or any acceleration of
vesting of any benefit or award, in the event of a Change of Control,
Franklin shall pay Executive an amount (a "Gross-Up Payment") such that
after payment by Employee of (i) all taxes imposed upon the Gross-Up
Payment, and (ii) any interest, penalties and additions which are
imposed on Executive with respect to such taxes, the Executive retains
an amount of the Gross-Up Payment equal to the sum of (i) the Excise
Tax imposed and (ii) the product of any deductions disallowed because
of the inclusion of the Gross-Up Payment in the Employee's adjusted
gross income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be
made. For purposes of determining the amount of the Gross-Up Payment,
the Employee shall be deemed to (i) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, and (ii) pay applicable
state and local income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(f) For purposes of this paragraph 6:
(1) "Good Cause" shall mean (A) Executive's death or
disability, (B) Executive's fraud, (C) Executive's
misappropriation of, or intentional material damage to, the
property or business of Franklin, (D) Executive's commission of a
felony which is likely to result in material harm or injury
(whether financial or otherwise) to Franklin, provided that if
Executive is ultimately not convicted of the alleged felony,
Franklin's termination of his employment based on this provision
shall be deemed to have been without Good Cause, or (E) with
respect to any termination not subject to subparagraph (c) of
this paragraph 6, Executive's willful and continued material
failure to perform his obligations under this Agreement, provided
that Franklin shall have given written notice to Executive
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describing such failure(s) and, as long as it is capable of being
cured and does not involve acts of material dishonesty directed
against Franklin, the same shall not have been substantially
cured or corrected within thirty (30) days thereafter, or if the
same could not reasonably be cured within such period, cure was
not commenced within such period and diligently pursued and fully
cured within sixty (60) days of Franklin's original notice to
Executive.
(2) "Good Reason" shall exist if (A) there is a change in
the Executive's title of Chief Financial Officer or a significant
change in the nature or the scope of Executive's authority, (B)
there is a reduction in Executive's Salary or retirement benefits
described in paragraph 3(d) or a material reduction in
Executive's compensation and benefits in the aggregate, excluding
(in the case of incentive benefits that are based upon the
performance of Executive or Franklin) reductions in benefits
resulting from diminished performance by Executive or Franklin,
(C) Franklin changes the principal location in which Executive is
required to perform services to a location more than fifty (50)
miles from Franklin's corporate headquarters as of the date of
this Agreement, (D) there is a reasonable determination by
Executive that, as a result of a change in circumstances
significantly affecting his position, he is unable to exercise
the authority, powers, function or duties attached to his
positions, or (E) any purchaser (or affiliate thereof) who
purchases substantially all of the assets of Franklin shall
decline to assume all of Franklin's obligations under this
Agreement.
(3) "Change in control" shall be deemed to have taken
place if (A) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, and
excluding any person who, as of the date of this Agreement, is
the beneficial owner of shares of Franklin stock representing 20%
or more of the total number of votes that may be cast for the
election of Directors, becomes the beneficial owner of shares of
Franklin stock representing 20% or more of the total number of
votes that may be cast for the election of Directors, or (B) as
the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing
transactions, the persons who immediately prior thereto were
directors of Xxxxxxxx xxxxx to constitute a majority of the Board
of Directors of Franklin. Notwithstanding the foregoing
sentence, a Change of Control shall not be deemed to occur by
virtue of any transaction in which Executive is a participant in
a group effecting an acquisition of Franklin if Executive holds
an equity interest in the entity acquiring Franklin at the time
of such acquisition.
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7. INDEMNIFICATION. Franklin shall indemnify, protect, defend and
hold harmless Executive from and against all liabilities, costs and expenses
(including but not limited to attorneys' fees) incurred as a result of
Executive's employment with Franklin to the fullest extent permitted by the
Indiana Business Corporation Law.
8. LITIGATION EXPENSES Franklin shall pay to Executive all out-of-
pocket expenses, including attorneys' fees, incurred by Executive in
connection with any claim or legal action or proceeding involving this
Agreement, whether brought by Executive or by or on behalf of Franklin or by
another party; provided, however, Franklin shall not be obligated to pay to
Executive out-of-pocket expenses, including attorneys' fees, incurred by
Executive in any claim or legal action or proceeding in which Franklin is a
party adverse to Executive if Franklin prevails in such litigation. Franklin
shall pay prejudgment interest on any money judgment obtained by Executive,
calculated at the published prime interest rate charged by Franklin's
principal banking connection, as in effect from time to time, from the date
that payment(s) to him should have been made under this Agreement.
9. POST-TERMINATION PAYMENT OBLIGATIONS ABSOLUTE. Franklin's
obligation to pay Executive the compensation and to make the other
arrangements provided herein to be paid and made after termination of
Executive's employment with Franklin shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right that Franklin
may have against him or anyone else. All amounts so payable by Franklin
shall be paid without notice or demand. Each and every such payment made by
Franklin shall be final and Franklin will not seek to recover all or any part
of such payment from Executive or from whomsoever may be entitled thereto,
for any reason whatsoever. Payment by Franklin of the termination benefits
provided in paragraphs 2 or 6 hereof, and the acceptance thereof by
Executive, shall constitute a release by Executive of all claims and actions
that Executive may have against Franklin arising out of Executive's
employment or the termination thereof except for continuing obligations of
Franklin under this Agreement.
10. DISCLOSURE OF CONFIDENTIAL INFORMATION. Without the consent of
Franklin, Executive shall not at any time divulge, furnish or make accessible
to anyone (other than in the regular course of business of Franklin) any
knowledge or information with respect to confidential or secret processes,
inventions, formulae, machinery, plan, devices or materials of Franklin or
with respect to any confidential or secret engineering development or
research work of Franklin or with respect to any other confidential or secret
aspect of the business of Franklin. Executive recognizes that irreparable
injury will result to Franklin and its business and properties, in the event
of any breach by Executive of any of the provisions of this paragraph 10. In
the event of any breach of any of the commitments of Executive pursuant to
this paragraph 10, Franklin shall be entitled, in addition to any other
remedies and damages available, to injunctive relief to restrain the
violation of such commitments by Executive or by any person or persons acting
for or with Executive in any capacity whatsoever.
11. SOLICITATION OF CUSTOMERS OR EMPLOYEES. During the term of this
Agreement and for a period of twenty-four (24) months after termination of
employment, Executive shall not, directly of indirectly, or assist any other
