SHAREHOLDERS AGREEMENT
Exhibit
4.2
SHAREHOLDERS
AGREEMENT
This
SHAREHOLDERS AGREEMENT (this “Agreement”)
is
made and entered into as of July 11, 2007, by and between Franklin Electric
Co.,
Inc., an Indiana corporation (the “Company”),
and
Select Equity Group, Inc., a New York corporation, and Select Offshore Advisors,
LLC, a New York limited liability company (collectively, the “Select
Entities”).
RECITALS
WHEREAS,
the Company is a party to that certain Rights Agreement, dated as of October
15,
1999 between Franklin Electric Co., Inc. and Illinois Stock Transfer Company,
as
amended by that certain First Amendment to Rights Agreement effective as of
December 1, 2006 between Franklin Electric Co., Inc. and LaSalle Bank National
Association (collectively, the “Rights
Agreement”);
WHEREAS,
pursuant to the Rights Agreement, and as defined therein, the Select Entities
and their “Affiliates”
and
“Associates”
would
become “Acquiring
Persons”
if
their “Beneficial
Ownership”
of
the
common stock, par value $.10 per share, of the Company (the “Common
Stock”)
were
to exceed 15% of the Common Stock outstanding;
WHEREAS,
the Company is willing, under certain circumstances, to permit the Select
Entities and their Affiliates and Associates to acquire and Beneficially Own
up
to 17.5% of the outstanding Common Stock of the Company without becoming
Acquiring Persons.
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section
1.1 Amendment of Rights Agreement.
The
Company agrees that no later than 10 business days after the date hereof, it
will revise the definition of “Acquiring Person” by amending the Rights
Agreement to add to Section 1a (x) thereof a new clause (vii) that will read
as
follows:
or
(vii)
Select Equity Group, Inc., Select Offshore Advisors, LLC and their respective
Affiliates and Associates (collectively, the “Select Parties”), so long as
either (A) the Select Parties Beneficially Own no more than 17.5% of the
outstanding shares of Common Stock and are eligible to report such ownership
on
Schedule 13G under the Exchange Act (or any comparable or successor report)
or
on Schedule 13D under the Exchange Act (or any comparable or successor report)
which Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies of the Company or engage in
any
of the actions specified in Item 4 of such Schedule (other than the acquisition
or disposition of Common Stock) or (B) if the Select
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Parties
are required to report their Beneficial Ownership of Common Stock on Schedule
13D under the Exchange Act (or any comparable or successor report) which
Schedule 13D states any intention to or reserves the right to control or
influence the management or policies of the Company or engage in any of the
actions specified in Item 4 of such Schedule (other than the acquisition or
disposition of Common Stock), then the Select Parties Beneficially Own no more
than 10% of the outstanding shares of Common Stock; provided, however, that,
if
the Select Parties cease to be deemed pursuant to clause (A) of this Section
1a
(x) (vii) not to be an Acquiring Person by virtue of being required to file
a
Schedule 13D stating an intention or reserving a right inconsistent with such
clause (A), then the Select Parties shall be deemed pursuant to clause (B)
of
this Section 1(a)(x)(vii) not to be Acquiring Persons, but only for a limited
period following the time the Select Parties ceased to be deemed pursuant to
such clause (A) not to be Acquiring Persons (such limited period ending on
the
earlier of 135 days following the time the Select Parties ceased to be deemed
pursuant to such clause (A) not to be Acquiring Persons and 90 days following
delivery by the Company to the Select Parties of a “Purchase Notice” or a
“Non-Purchase Notice” pursuant to that certain Shareholders Agreement made and
entered into as of July 11, 2007, by and between the Company and the Select
Parties), without regard to whether the Select Parties Beneficially Own during
limited period more than 10% of the outstanding Common Stock (so long as the
Select Parties do not Beneficially Own during such period more than 17.5% of
the
outstanding Common Stock); and provided, further, that, for all purposes of
this
Section 1 a (x) (vii), the Select Parties shall be deemed not to be Acquiring
Persons if (W) at any time there is a reduction in the number of shares of
Common Stock outstanding, (X) prior to the time of such reduction in the number
of shares of Common Stock outstanding the Select Parties were not, or were
deemed not to be, Acquiring Persons, (Y) following the time of such reduction
in
the number of shares of Common Stock outstanding the Select Parties are, or
would be deemed to be, Acquiring Persons, and (Z) following the time of such
reduction in the number of shares of Common Stock outstanding the Select Parties
do not acquire Beneficial Ownership of any additional shares of Common
Stock.
Section
1.2 Certain Sales of Common Stock.
(a) At
any
time within 45 days following the time the Select Entities cease to be deemed
pursuant to clause (A) of Section 1a (x) (vii) of the Rights Agreement (as
such
clause (vii) will be added to the Rights Agreement pursuant to Section 1.1
of
this Agreement) not to be an Acquiring Person by virtue of being required to
file a Schedule 13D stating an intention or reserving a right inconsistent
with
such clause (A), the Company shall have the right, but not the obligation,
to
deliver to the Select Entities a written notice (the “Purchase
Notice”)
stating that it intends to purchase from the Select Entities any or all of
the
Excess Shares (as defined below). No later than the Closing Date (as defined
below), the Select Entities shall transfer the Excess Shares to a brokerage
account maintained by the Company, or shall otherwise deliver the Excess Shares
to the Company, against payment of the purchase price therefor, which shall
be
equal to the Per Share Price (as defined below) multiplied by the number of
Excess Shares being sold. The Company and the Select Entities shall cooperate
in
coordinating the transfer of the Excess Shares to the Company and the payment
to
the Select Entities
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of
the
purchase price therefor such that those actions are taken in an expeditious
and
efficient manner.
For
purposes of this Section 1.2(a), the following terms shall have the following
meanings:
“Excess
Shares”
shall
mean a number of shares of Common Stock equal to the difference, if any, between
(i) the number of shares of Common Stock Beneficially Owned by the Select
Entities, but not including any shares of Common Stock as to which the Select
Entities, prior to receiving the Purchase Notice, had binding obligations to
sell or otherwise dispose of, and (ii) that number of shares of Common Stock,
rounded down to the nearest whole share, constituting 10% of the number of
shares of Common Stock outstanding on the date the Purchase Notice is received
by the Select Entities.
“Closing
Date”
shall
mean the tenth business day following the date of receipt of the Purchase
Notice.
“Per
Share Price”
shall
mean the average of the closing prices (or average of the closing bid and asked
prices if there is no closing price) of the Common Stock on the Nasdaq Global
Select Market (or such other principal market on which the Common Stock may
be
traded or quoted) for the 15 trading days immediately preceding (but not
including) the date of the Purchase Notice.
(b) The
Select Entities agree that during the limited period of time referred to in
the
first proviso to clause (vii) of Section 1 a (x) of the Rights Agreement (as
such clause (vii) will be added to the Rights Agreement pursuant to Section
1.1
of this Agreement) they will not sell any shares of Common Stock in a privately
negotiated transaction, other than a sale to the Company or a privately
negotiated sale to a purchaser approved by the Company in its sole
discretion.
(c) If
the
Company determines not to deliver to the Select Entities a Purchase Notice
pursuant to Section 1.2(a) of this Agreement, it may, but shall not be required
to, deliver to the Select Entities a notice (the “Non-Purchase
Notice”)
stating that such notice is a Non-Purchase Notice pursuant to this Section
1.2(c) and that it does not intend to deliver a Purchase Notice to the Select
Entities. Upon delivery of the Non-Purchase Notice pursuant to this Section
1.2(c), the right of the Company to deliver a Purchase Notice pursuant to
Section 1.2(a) of this Agreement shall be terminated and shall
cease.
Section
1.3 Certain Notice.
Promptly following the occurrence of circumstances giving rise to the
requirement to file a Schedule 13D under the Exchange Act (or any comparable
or
successor report) stating an intention or reserving a right inconsistent with
the provisions of Section 1 a (x) (vii)(A) of the Rights Agreement (as the
Rights Agreement will be amended pursuant to Section 1.1 of this Agreement),
the
Select Entities shall give written notice of such circumstances to the
Company.
Section
1.4 Voting Agreement.
So long
as the Select Entities Beneficially Own in excess of 15% of the Common Stock
and
are required to file a Schedule 13D stating an intention or reserving a right
inconsistent with the provisions of Section 1 a (x) (vii)(A) of the Rights
Agreement (as the Rights Agreement will be amended pursuant to Section 1.1
of
this Agreement), then upon receipt by the Select Entities of written notice
from
the Company so requiring (a “Voting Notice”), the Select Entities shall vote all
shares of Common Stock
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Beneficially
Owned by them and as to which they have the right to vote (the “Voting Shares”)
proportionately with all other shares of Common Stock actually voted on each
proposal or matter presented at any meeting of the Company’s stockholders (a
“Stockholders
Meeting”).
The
Select Entities (i) shall only be required to vote in such manner at any
Stockholders Meeting if they shall have received a Voting Notice no later than
15 business days prior to the date of the Stockholders Meeting and (ii) shall
use commercially reasonable efforts to vote such shares in such manner no later
than five days in advance of any such Stockholders Meeting. For the avoidance
of
doubt, the Voting Shares are held in “street name,” and it is intended by the
parties that the Select Entities shall, promptly after receiving a Voting
Notice, seek to obtain one or more “legal proxies” entitling them to vote the
Voting Shares at such Stockholders Meeting and, based on the voting authority
conferred by any such legal proxies received, shall deliver to the Company
a
proxy or ballot instructing that the Voting Shares be voted proportionately
with
all other shares of Common Stock actually voted on each proposal or matter
presented at any meeting of the Company’s stockholders.
Section
1.5 Company Expenses.
The
Select Entities agree to pay the Company’s out-of-pocket expenses in connection
with the negotiation, execution and delivery of this Agreement and the amendment
of the Rights Agreement as contemplated hereby, up to an aggregate amount of
$25,000.
Section
1.6 Representations and Warranties.
(a) Each
of
the parties hereto represents and warrants to the other parties
that:
(i) such
party has all requisite authority and power to execute and deliver this
Agreement and to consummate the transactions contemplated hereby,
(ii) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
required action on the part of such party and no other proceedings on the part
of such party are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby,
(iii) this
Agreement has been duly and validly executed and delivered by such party and
constitutes the valid and binding obligation of such party enforceable against
such party in accordance with its terms, and
(iv) this
Agreement will not result in a violation of any terms or provisions of any
agreements to which such person is a party or by which such party may otherwise
be bound or of any law, rule, license, regulation, judgment, order or decree
governing or affecting such party.
(b) The
parties hereto acknowledge, warrant and represent that they have carefully
read
this Agreement, understand it, have consulted with and received the advice
of
counsel regarding this Agreement, agree with its terms, are duly authorized
to
execute it and freely, voluntarily and knowingly execute it.
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Section
1.7 General.
(a) This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto and the respective successors, personal representatives
and assigns of the parties hereto.
(b) This
Agreement contains the entire agreement between the parties with respect to
the
subject matter hereof and thereof and supersedes all prior and contemplated
arrangements and understandings with respect thereto.
(c) This
Agreement may be signed in counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same
Agreement.
(d) All
notices and other communications required or permitted hereunder shall be
effective upon receipt and shall be in writing and may be delivered in person,
by telecopy, electronic mail, express delivery service or U.S. mail, in which
event it may be mailed by first-class, certified or registered, postage prepaid,
addressed to the party to be notified at the respective addresses set forth
below, or at such other addresses which may hereinafter be designated in
writing:
If
to the
Company:
Franklin
Electric Co. Inc.
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxxx,
Xxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxx
Fax
No.:
(000) 000-0000
Email:
xxxxxxx@xxxx.xxx
with
a
copy to:
Xxxxxx
Xxxxxx LLP
0000
Xxxxx Xxxxx
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxx, Esq.
Fax
No.:
(000) 000-0000
Email:
xxxxxx@xxxxxxxxxxxx.xxx
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If
to the
Select Entities:
Select
Equity Group, Inc.
000
Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxx, Esq.
Fax
No.:
(000) 000-0000
Email:
xxx@xxxxxxxxxxxx.xxx
with
a
copy to:
Xxxxxxx
Xxxx & Xxxxxxxxx LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxxx, Esq.
Fax
No.:
(000) 000-0000
Email:
xxxxxxxxx@xxxxxxx.xxx
(e) This
Agreement and the legal relations hereunder between the parties hereto shall
be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and performed therein, without giving effect to
the
principles of conflicts of law thereof.
(f) Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid, but if any provision of this Agreement is held
to
be invalid or unenforceable in any respect, such invalidity or unenforceability
shall not render invalid or unenforceable any other provision of this
Agreement.
(g) It
is
hereby agreed and acknowledged that it will be impossible to measure in money
the damages that would be suffered if the parties fail to comply with any of
the
obligations herein imposed on them and that in the event of any such failure,
an
aggrieved person will be irreparably damaged and will not have an adequate
remedy at law. Any such person, therefore, shall be entitled to injunctive
relief, including specific performance, to enforce such obligations, without
the
posting of any bond, and, if any action should be brought in equity to enforce
any of the provisions of this Agreement, none of the parties hereto shall raise
the defense that there is an adequate remedy at law.
(h) Each
party hereto shall do and perform or cause to be done and performed all such
further acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto reasonably
may
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(i) Each
of
the parties hereto hereby irrevocably and unconditionally consents to submit
to
the exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York, for
any action, proceeding or investigation in any court or before any governmental
authority arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any action, proceeding or
investigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document
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by
registered mail to its respective address set forth in this Agreement shall
be
effective service of process for any action, proceeding or investigation brought
against it in any such court. Each of the parties hereto hereby irrevocably
and
unconditionally waives any objection to the laying of venue of any action,
proceeding or investigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in
any
such court that any such action, proceeding or investigation brought in any
such
court has been brought in an inconvenient forum.
[Remainder
of page intentionally left blank.]
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IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first written above.
FRANKLIN
ELECTRIC CO. INC.
By:
Name:
Xxxxxx X. Xxxxxx
Title:
Vice President, Chief Financial Officer and Secretary
SELECT
EQUITY GROUP, INC.
By:
Name:
Xxxxxx X. Xxxxxxx
Title:
President
SELECT
OFFSHORE ADVISORS, LLC
By:
Name:
Xxxxxx X. Xxxxxxx
Title:
Manager
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