EMPLOYMENT AGREEMENT
Exhibit
10.1
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THIS
EMPLOYMENT AGREEMENT is entered into as of this 1 day of April, 2008 between
FRANKLIN ELECTRIC CO., INC. (“Franklin”), an Indiana corporation, and Xxxx X.
Xxxxxx (the “Executive”).
WHEREAS,
Franklin desires to employ Executive as its Vice President and Chief Financial
Officer, and Executive is willing to accept such employment upon the terms and
conditions set forth below;
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 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
Management Organization and Compensation Committee of the Board of Directors of
Franklin.
2. TERM. The
employment of Executive hereunder (the “Term”) shall be for a three (3) year
period commencing on April 14, 2008 and ending on April 14, 2011, provided that
on April 14, 2011 and each April 14 thereafter 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
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, 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
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 $250,000 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
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effect
without Executive’s consent), payable in equal monthly 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 Management Organization and
Compensation Committee of Franklin’s Board of Directors pursuant to the Franklin
Executive Officer Bonus Plan; it being understood and agreed to that, for the
fiscal year ending 2008, such bonus, payable in the first quarter of 2009, will
not be less than $160,000;
(c) Participation
in the Franklin Electric Co., Inc. Stock Plan, and any successor stock plans, as
long as such plans remain in effect, and in any future compensation plans
covering senior executives of Franklin; it being understood and agreed to that,
promptly after the release of First Quarter 2008 earnings and at a time when
Franklin executive officers are otherwise permitted by Franklin’s policies to
effect transactions in Franklin’s securities, under and subject to the terms of
the Franklin Electric Co., Inc. Stock Plan, (i) Executive will receive an option
to purchase 10,000 shares of Franklin’s common stock at an option exercise price
equal to the closing price of Franklin’s common stock on the grant date, with
the option vesting ratably in four equal annual installments, the first
installment vesting on the first anniversary of the grant date and (ii)
Executive will receive an 8,000 share grant of Franklin’s common stock, such
grant to vest 100% on the fourth anniversary of the grant date;
(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, profit sharing plan,
health or dental plan, disability 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. Effective April 14, 2008 three (3)
weeks annual vacation and effective January 1, 2009 4 weeks annual vacation;
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.
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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 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) twelve (12) 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
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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 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) twenty-four (24) 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:
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(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
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
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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.
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
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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 person to, solicit, or
communicate with, whether by written or personal contact, any customer or
prospect of Franklin on behalf of any organization offering products competitive
with products Franklin sold or developed while Executive was employed by
Franklin, and Executive shall not (i) directly or indirectly, employ or retain
or solicit for employment or arrange to have any other person, firm or other
entity employ or retain or solicit for employment or otherwise participate in
the employment or retention of any person who is an employee of Franklin or (ii)
encourage or solicit any such employee to leave the service of
Franklin.
12. NOTICES. Notices
given pursuant to this Agreement shall be in writing and shall be deemed given
when received or, if mailed, two days after mailing by United States registered
or certified mail, return receipt requested, postage prepaid and addressed as
herein provided. Notice to Franklin shall be addressed to Corporate
Secretary, Franklin Electric Co., Inc. at 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxx 00000. Notices to Executive shall be addressed to the
Executive at his last permanent address as shown on Franklin’s
records. Notwithstanding the foregoing, if either party shall
designate a different address by notice to the other party given in the
foregoing manner, then notices to such party shall be addressed as designated
until the designation is revoked by further notice given in such
manner.
13. PAYMENT
OF LEGAL FEES. Franklin shall pay Executive’s reasonable attorneys’
fees and legal expenses in connection with the negotiation of this
Agreement.
14. ENTIRE
AGREEMENT. This Agreement contains the entire understanding between
the parties with respect to the subject matter hereof and cannot be amended,
modified or supplemented in any respect, except by a subsequent written
agreement entered into by both parties hereto.
15. SEVERABILITY. If
any provision of this Agreement or the application thereof is held invalid, such
invalidity shall not affect other provisions or applications of this Agreement
that can be given effect without the invalid provision or application and, to
such end, the provisions of this Agreement are declared to be
severable.
16. SUCCESSORS. This
Agreement may not be assigned by Franklin except in connection with a merger
involving Franklin or a sale of substantially all of its assets, and the
obligations of Franklin provided for in this Agreement shall be the binding
legal obligations of any successor to Franklin by purchase (if such successor
assumes this Agreement), merger, consolidation, or otherwise. Without
limiting the foregoing the provisions of this Agreement relating to termination
of employment with Franklin shall be applicable to termination of employment
with any such successor. This
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Agreement
may not be assigned by Executive during his life, and upon his death will be
binding upon and inure to the benefit of his heirs, legatees and the legal
representatives of his estate.
17. WAIVER,
MODIFICATION AND INTERPRETATION. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by Executive and an appropriate officer of
Franklin empowered to sign the same by the Board of Directors of
Franklin. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by the other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Indiana. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
18. WITHHOLDING. Franklin
may withhold from any payment that it is required to make under this Agreement
amounts sufficient to satisfy applicable withholding requirements under any
federal, state, or local law.
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HEADINGS. The
headings contained herein are for reference purposes only and shall not in
any way affect the meaning or interpretation of any provision of this
Agreement.
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IN
WITNESS WHEREOF, the
parties hereto have executed this Agreement on the day and year first written
above.
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FRANKLIN
ELECTRIC CO., INC.
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By:
________________________
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R.
Xxxxx Xxxxxxxx
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Its:
Chairman and Chief Executive Officer
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EXECUTIVE
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_________________________
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Xxxx
X. Xxxxxx
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